Abercrombie & Fitch (NYSE: ANF) reported Q1 EPS of $0.67, $1.05 better than the analyst estimate of ($0.38). Revenue for the quarter came in at $781.41 million versus the consensus estimate of $675.62 million.

• Net sales of $781 million, up 61% as compared to last year and up 6% as compared to pre-COVID 2019 first quarter net sales.
• Digital net sales increased 45% to $403 million reflecting robust growth in every month of the quarter.
• Gross profit rate improved 900 basis points to 63.4% driven by higher average unit retail on lower promotions.
• Operating expense, excluding other operating (income) loss, net, was down 7% and up 2% as compared to last year on a reported and adjusted non-GAAP basis, respectively, reflecting a decrease in store occupancy and increases in payroll and customer-facing expenses. Operating expense as a percentage of sales decreased to 56.2% and 55.9% from 97.4% and 88.6% on a reported and adjusted non-GAAP basis, respectively.
• Operating income of $57 million and $60 million on a reported and adjusted non-GAAP basis, respectively, as compared to operating loss of $209 million and $166 million last year, on a reported and adjusted non-GAAP basis, respectively.
• Net income per diluted share of $0.64 and $0.67 on a reported and adjusted non-GAAP basis, respectively, as compared to net loss per diluted share last year of $3.90 and $3.29 on a reported and adjusted non-GAAP basis, respectively.

Fran Horowitz, Chief Executive Officer, said, “2021 is off to a strong start. We built on the significant progress we made in 2020, registering our best first quarter operating income since 2008. The first quarter is evidence that our shift to a digitally-led global business model is working. Total net sales grew 61% year-over-year, with digital sales up 45% to 52% of total sales. Inventories remained tightly controlled and product resonated with both new and existing customers, fueling improved price realization and benefiting gross margin rate, which expanded by 900 basis points. We remained focused on funding key investments in customer-facing initiatives and delivered significant first quarter operating leverage.”

“Results were well-ahead of first quarter 2019 pre-COVID levels, with net sales 6% higher, including up 18% in our largest market, the U.S., gross margin expansion of 290 basis points and operating margin increasing 1,100 basis points. Sales growth was achieved despite the reduction of 1.3 million gross square feet of store space, or 20%, compared to the first quarter of 2019.”

“Momentum has continued into the second quarter across brands, and early reaction to our newest member of the A&F Co. family, Social Tourist, has been amazing. Our solid foundation and strong liquidity position enables us to be on the offense. We remain focused on profitable topline growth, our ongoing digital evolution and our growth vehicles, including Gilly Hicks, and are committed to thoughtful expense management and global square footage optimization. Although the global landscape remains uncertain, I am excited about the future and more confident than ever in our ability to drive sustainable, long-term operating margin expansion.”

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