Abercrombie & Fitch Co. has seen some unfortunate quarters after years surrounded by controversy, prompting the brand to undergo an extreme rebranding.
However, over the last several quarters, the company seems to have turned around its unpleasant reputation on its way to reaching record numbers in Q2. Yet the fight is far from over for the teen fashion retailer.
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The company published Q2 earnings for 2024 this week, leading Abercrombie (ANF) shares to fall as much as 18% on Wednesday, a shocking reversal from a 174% increase year over year.
But the stock rebounded 3.3% Thursday, rising after Abercrombie reported earnings per share of $2.50 for Q2 of 2024, outdoing analysts' expectations of $2.22.
The company reported net sales of $1.1 billion, representing a 21% increase from a year ago and comparable sales growth of 18%.
Abercrombie alone reported net sales growth of 26%, and Hollister, its sister brand, reported growth of 17% for this year's Q2.
"In addition to record second quarter sales, this was our seventh consecutive quarter of net sales growth in a dynamic, often uncertain consumer environment which underlies the strength of our brands, our team, and our playbook," said CEO Fran Horowitz during the Q2 earnings call.
A decline aiming for success
According to CFRA analyst Zachary Warring for Yahoo! Finance, Wednesday's stock decline is only a catalyst for the brand's shares moving forward.
"The company has now got a clean balance sheet. They have no debt. So they have plenty of room over the next 12 to 24 months to buy back shares," said Warring
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Warring does not think investors should be too worried about the stock's decline and predicts Abercrombie's shares will go up to $200 over the next 12 months. Shares were trading at $141.85 at last check Thursday.
Abercrombie and its turbulent history
Established in 1892, Abercrombie gained popularity as an iconic mall brand in the 1990s thanks to its previous CEO, Mike Jeffries.
The former CEO targeted 'good-looking' teens and young adults, making the company thrive on its exclusivity, profiting from people's desire to fit the brand.
In 2014, Abercrombie appointed Fran Horowitz as the new CEO after Jeffries landed the brand a reputation surrounding claims of racism and discrimination.
In 2021, Abercrombie did a complete 180, undergoing a game-changing rebrand that targeted Gen Z and focused on individuality and style.
Abercrombie reveals new strategy
Despite Abercrombie's big comeback over the past two years, environmental uncertainty remains a big threat.
According to Abercrombie's Q2 earnings call, the company is focused on adapting to the current times to fulfill the ever-evolving customer's needs.
Abercrombie will continue to center its target market on Gen Z through digital marketing and social selling. The company is diving into affiliate sales through social channels in partnership with influencers.
Analyst Warring says Abercrombie is "the best-performing apparel brand in the US right now," and this is largely due to its social media marketing approach.
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In the earnings call, the company also revealed its plan to expand its store footprint with a profit-based mindset.
Abercrombie ended Q2 with 757 stores, including 18 new openings, 30 remodeled or re-sized stores, and 26 closures.
The company expects approximately 60 new stores, 60 remodeled or re-sized stores, and 40 closures for the full year.
"I am incredibly proud to report our financial results exceeded the expectations we provided in May and set second quarter company records for both net sales and operating profit," said Horowitz during the Q2 earnings call.
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