Abercrombie&Fitch "cautiously optimistic" on 2023 customer demand

By Scott Kanowsky

Investing.com -- Abercrombie&Fitch Company (NYSE: ANF) has said it remains "cautiously optimistic" about consumer demand in 2023 after the fashion retailer posted better-than-expected sales in the fourth quarter.

The company expects operating margin to be in the range of 4% to 5% this year, bolstered in particular by strong U.S. performance. Freight and raw material costs are seen easing compared to 2022, although this trend will be partially offset by higher expenses stemming from investments in its 2025 growth plans.

Meanwhile, in the first quarter, net sales at the Ohio-based owner of casual wear chains like Abercrombie Kids and Hollister are projected to be flat at $813 million, with an operating margin somewhere between breakeven to 2%.

"We are pleased with our inventory levels and each of our brands is in a position to chase," said chief executive officer Fran Horowitz in a statement.

"While we expect to see net product cost benefits in 2023, we will continue to tightly manage our expenses, inventory and cash flow to properly balance investing for the long-term while improving profitability."

The outlook comes after sales in the fourth quarter grew by 3.3% year-on-year to $1.20 billion, slightly ahead of Bloomberg consensus estimates of $1.18B, as demand for its eponymous Abercrombie brand helped overcome weakness at Hollister. Horowitz noted that the group faced "significant" challenges from surging inflation, which has threatened to lead shoppers to rein in spending on retail items.

Adjusted earnings per share fell to $0.81 from $1.14 in the final three months of the prior year, below analysts' target of $0.86 per share.

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