© Reuters. FILE PHOTO: A person carries a bag from the Abercrombie & Fitch store on Fifth Avenue in Manhattan, New York City, U.S., February 27, 2017. REUTERS/Andrew Kelly/File Photo
(Reuters) -Abercrombie & Fitch raised its forecast for annual sales on Wednesday, betting that newer styles at its Abercrombie label and improved assortment at Hollister would pull more shoppers even as consumer spending remains pressured in the U.S.
Shares of the Ohio-based company jumped about 15% in premarket trading after its second-quarter sales and profit also crushed Wall Street expectations.
Abercrombie has been filling its shelves with a fresh collection of styles, including more dressy apparel and cargo pants, while also capitalizing on the demand for wide-legged denim bottoms, as jeans become a post-pandemic workwear wardrobe staple.
The company’s tight control over its inventories, which were down 30% at the quarter end, enabled it to steer clear of offering discounts and promotions or reducing product prices.
The move helped its gross profit rate expand by 460 basis points to 62.5%.
Abercrombie’s upbeat forecast bucks a gloomy retail tone set by companies in recent weeks, with department store chains Macy’s (NYSE:) and Kohl’s (NYSE:) both leaving their annual forecasts unchanged, despite quarterly profit beats, against the backdrop of strained consumer spending.
Net sales at the company’s Abercrombie brand jumped 26% in the three months ended July 29, while the Hollister division posted at an 8% rise, its first revenue growth, after declining for the past five quarters.
The company said it now expects net sales to rise around 10% for fiscal 2023, compared with its prior forecast range of 2% to 4% growth. Analysts, on average, had estimated a 3.9% rise to $3.84 billion in revenue, according to Refinitiv IBES data.
It posted a profit per share of $1.10 in the second quarter, trouncing estimates of 17 cents.
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