Abercrombie & Fitch Co., the parent company of Abercrombie & Fitch, Hollister and Gilly Hicks, reported its second quarter 2024 earnings Wednesday, showing strong financial performance despite ongoing challenges with freight costs. The company achieved record net sales of $1.13 billion for the quarter ending on August 28, marking a 21% increase compared to last year. CEO Fran Horowitz noted the company’s “balanced performance across brands, regions and genders.”
During the earnings presentation, Scott Lipesky, CFO, addressed the impact of rising freight costs on the company’s gross margins. “Freight has turned into a bit of a headwind as we’ve [entered] the back half [of the year],” he said. “We are baking in elevated freight [costs], assuming they continue into and through the fourth quarter.” Despite related challenges, the company managed to achieve a gross profit rate of 64.9%, up 240 basis points from last year, supported by lower cotton costs and strategic inventory management.
Among the Abercrombie & Fitch brand’s successes in the second quarter was maintaining a well-balanced assortment across key categories. Horowitz highlighted the brand’s strong performance in both the men’s and women’s segments, particularly in seasonal items like shorts, swim, skirts and dresses. “We are seeing a lot of consistency in categories,” she said. “Tops are working, bottoms are working, and we continue to have this incredibly growing dress business.”
Its NFL and wedding apparel sales were also highlights. The brand’s NFL partnership started small 2-3 years ago and now encompasses all 32 teams and multiple product categories. This year, Abercrombie will build on the success of its NFL fleeces and T-shirts with the introduction of sweaters, outerwear and hats, among other products. “That’s how we do it: We test, we learn, and we continue to add categories and build on momentum,” said Horowitz.
As for the brand’s 6-month-old wedding category, its sales beat expectations, said Horowitz. The company will introduce new wedding styles this fall.
Early back-to-school sales, which kicked off in Q2, were promising, Horowitz said. Specifically, they showed strong demand for denim, particularly the low-rise, baggy styles that have been a hit among younger consumers.
For its part, the Hollister brand saw a net sales growth of 17% in the quarter, an acceleration from the 12% growth it saw in the first quarter.
Abercrombie’s strategic focus over the last couple of quarters on localized assortments in key markets like the U.K. and Germany has paid off, with these regions leading the company’s growth in EMEA. “These were our two largest countries in Europe, and they were two of our fastest-growing countries in Europe,” Lipesky said.
Looking ahead, the company is cautiously optimistic about the third quarter, expecting low double-digit sales growth despite the continued pressure from freight costs. Maintaining lean inventory levels is a key focus. “Unit [quantities] have been tightly controlled,” said Lipesky. “Each brand continues to be in that read, react and chase mode, and we are excited about how that sets us up for the holiday season.”
Carefully managing promotions to preserve margins is also a priority, “Our promotions are based on our business,” said Horowitz. “We work with the team every Monday to see what’s working and what’s not working in our business, and we drive our promotions based off of that. They’ve come down considerably over the years.”
As Abercrombie & Fitch enters the crucial holiday season, the company is well-positioned to continue its growth trajectory, supported by a strong assortment mix and a focus on balancing short-term pressures with long-term investments in brand strength and infrastructure.
