A&F Posts Strong Q1; Proceeds Cautiously for B-t-s

Fran Horowitz 

Charli and Dixie D’Amelio in the new Social Tourist brand. 

It’s also made significant inroads in social media, and just last week launched Social Tourist, a new brand at the Hollister division targeting Gen Z’s digital-first mind-set and created in collaboration with social media personalities Dixie and Charli D’Amelio. Social Tourist includes men’s and women’s T-shirts, fleeces, dresses, skirts, swimwear, socks, hats and water bottles across four distinct categories: dual gender, trend pieces, basics and swim. Horowitz said early reaction to the brand was “amazing,” though no specifics on the first-week results were given.

In the past, officials have suggested the possibility of an acquisition to expand the portfolio of brands. Asked if with the advent of Social Tourist, an acquisition is still on the table, Scott Lipesky, chief financial officer, said, “It’s something we think about. We have the financial capacity to do it. But today it’s not a top priority.”

Operating income for the three months ended May 1 reached $57 million and $60 million on a reported and adjusted non-GAAP [generally accepted accounting principles] basis, respectively. That compared to an operating loss of $209 million and $166 million last year, on a reported and adjusted non-GAAP basis, respectively.

Around the world, the company continues to be impacted by the pandemic, with between 30 and 35 stores still closed, primarily in Canada and Germany, though stores in Germany are open on a by-appointment basis. “Throughout the world, we are still not operating at full capacity,” Horowitz said, noting restrictions vary depending on the city. “It really hasn’t normalized or returned to a new normal” yet, the CEO observed.

Horowitz also said sales growth was achieved despite the reduction of 1.3 million gross square feet of store space, or 20 percent, compared to the first quarter of 2019.

“Momentum has continued into the second quarter across brands,” Horowitz said in a statement.

Other retailers in the U.S., including Macy’s and Nordstrom, have been reporting momentum in the first quarter of this year due to the rollout of COVID-19 vaccinations and decline in COVID-19 cases, some pent-up demand, and people starting to go out more. Store traffic is picking up but still very much down from 2019 levels.

By division, Hollister sales rose 62 percent to $442.4 million in the quarter from $273 million in the year-ago period. Abercrombie sales rose 60 percent to $339 million from $212.35 million in the year-ago period.

“Our solid foundation and strong liquidity position enables us to be on the offense,” Horowitz said. “We remain focused on profitable top-line 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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