The numbers from Abercrombie & Fitch: revenue up 20%, comp sales up 6% and net profit up 39%, beating Wall Street Estimates.
When digging into the numbers, some very interesting trends within the different brands: A&F comps were down 6%, abercrombie comps were up 30% and Hollister comps were up 13%. A&F menswear comps decreased by low single digits while womens apparel comp decrease was in the mid single digits. They didn’t talk specifics about RUEHL, except to say that it is performing well in comp and net sales perspective.
Some quick key points from the call that I found interested are that they seem to be that they are reducing the amount of promotional events, reducing the amount of clearance cycles, reducing floor space devoted to clearance, putting $50 million back into the stores in capital improvements this year. These are all geared towards improving the gross margin, which came in at an astounding 65.4%.
The thing that is amazing me about A&F is that they are able to get away with all of this. In such a tight retail market, they are now in their twentieth month of overall comp store gains (minus a slight hiccup this March). They have created the ultimate lifestyle destination brand and they are able to get away with charging top dollar for it. They have played with pricing, tweaking the price points at RUEHL and Hollister to be more competitive (they say they are pricing Hollister to be more competitive with American Eagle and they have brought the price points of RUEHL to an average of 12% more than A&F, down from the original 30% increase over the average A&F price point).
I do like their honesty when talking about the decline in A&F womens comps they said “I think we simply could have done better in that business. I dont think that we flowed units and fashion as aggressively as we might have.” The decline, they say, is out of line with the womens business at the other brands. It’s good to see a retailer own up to a mistake like that and look for ways to improve.
Another good quarter for company as a whole. Going into the Back to School season, the company has some very impressive comp numbers to contend with (May, June, July & August of 2005 had comps of 29%, 38%, 22% and 24% companywide) which will make the numbers look flat or soft. Their challenge for the rest of 2006 is to improve upon inventory management and pricing to drive the gross margin. However, if Abercrombie & Fitch is able to reasonably build on these comp numbers, look for this to continue to be one of the hottest retailers going into the second half of the year.
More coverage of the Q1 results from Businessweek and Bizjournals.
Transcript of the conference call from Retail Stock Blog.
Full SEC form 8-k filing from Yahoo.