Abercrombie & Fitch Misses Q4 EPS by 5c, Revenue Beats, Offers Outlook

Abercrombie & Fitch (ANF) reported Q4 EPS of $0.81, $0.05 worse than the analyst estimate of $0.86. Revenue for the quarter came in at $1.2 billion versus the consensus estimate of $1.18 billion.

Fiscal 2023 Full Year Outlook:

For fiscal 2023, the company expects:

• Net sales growth in the range of 1 to 3% from $3.7 billion in 2022 with the expectation that Abercrombie will continue to outperform Hollister and the U.S. will continue to outperform International. We expect growth to be weighted to the second half of the year, driven primarily by the inclusion of a 53rd week for reporting purposes, along with net store expansion. The 53rd week is estimated to to add approximately $45 million to total net sales in 2023.
• Operating margin to be in a range of 4 to 5%, which includes a benefit of around 200 basis points from full year 2022 levels on expected net improvement in freight and raw material costs, partially offset by modest operating margin deleverage from the combination of inflation and increased operating expense investment for the 2025 Always Forward Plan initiatives, including an upgrade of our retail merchandising ERP system.
• Effective tax rate to be in the mid-40s with continued inability to realize benefits on certain, expected tax losses incurred outside of the U.S.
• Capital expenditures of approximately $160 million.

Fiscal 2023 First Quarter Outlook

For the first quarter of fiscal 2023, the company expects:

• Net sales to be around flat to fiscal first quarter 2022 level of $813 million.
• Operating margin to be in the range of breakeven to 2% compared to (1)% in Q1 2022 period on expected net improvement in freight and raw material costs, partially offset by modest operating margin deleverage from the combination of inflation and increased operating expense investment for the 2025 Always Forward Plan initiatives, including an upgrade of our retail merchandising ERP system.
• Effective tax rate expected to be volatile in Q1 on expected low levels of income. We expect to incur tax expense regardless of level of taxable income or loss.