Abercrombie keeps up the comeback with another billion-dollar quarter

Retail’s biggest comeback story is stitching up even more gains: Abercrombie & Fitch reported record second-quarter revenue that beat Wall Street expectations and raised its sales outlook for the full year, despite an “increasingly uncertain environment.”

Sales for the quarter were $1.1 billion, marking A&F’s second billion-dollar quarter in a row. Operating income was $176 million, almost doubling last year’s $90 million, and net income more than doubled. Both the Abercrombie and Hollister brands saw double-digit sales growth in the second quarter, fueled by strong demand for denim and dresses during the summer and back-to-school season.

Despite all those numbers going up, the stock sank 15% after the retailer warned about increasing freight costs and slowing margin growth. Even with today’s decline, shares of A&F have been on a tear – they’re up 58% so far this year. That’s after soaring 285% in 2023 — more than the stock market’s all-star, Nvidia.

Adam Crisafulli, an analyst at Vital Knowledge, wrote in a note to clients that Abercrombie is held to a higher standard than most retailers because of its growth, and “people will probably be modestly underwhelmed” with the results.

Long known as a teen retailer, Abercrombie in recent years has started to diversify its offerings, sparking growth in both its men’s and women’s divisions. Since launching in March, A&F's wedding shop has exceeded expectations, with the company noting it has benefited as weddings turn into multi-day occasions. Last quarter, it added men's suits to the mix. 

Abercrombie also expanded its partnership with the NFL to cover all 32 teams and is planning to launch a new range of fall essentials like sweaters, hats, and outerwear.

Abercrombie’s results come during a big week for retail earnings, which could offer more clues to consumer confidence. American Eagle, Birkenstock, and Ulta Beauty all report Thursday.