ABERCROMBIE & FITCH CO /DE/ Q4 FY2024 earnings call

• Fiscal 2024 saw net sales grow 16% to $4.95 billion, operating income up 53%, operating margin 15%, and EPS up 72% to $10.69.
• Fourth quarter net sales grew 9% (excluding 53rd week headwind) with double-digit comparable sales growth across regions. Abercrombie had 5% comparable sales growth, Hollister 24%.
• Key wins included both brands growing double digits, adding millions of new customers; Hollister returned to growth with 15% net sales growth and 40 remodels/rightsizes; Abercrombie had 16% net sales growth for fourth consecutive year.
• Regions: Americas grew 17%, EMEA 12%, APAC 9%.
• Read & React inventory model was critical, with inventory up 22% at cost, units up 6% to support Q1 2025 sales.
• Store fleet: 125 new store experiences, net store opener for third year, ending with 789 stores.

For the fourth quarter, Abercrombie had comparable sales growth of 5% and net sales growth of 16%, while Hollister had comparable sales growth of 24% and net sales growth of 15% for the year. In the fourth quarter, Abercrombie brands delivered net sales growth of 2% on comparable sales growth of 5%, and Hollister brands had net sales growth of 16% on comparable sales growth of 24%. For the full year 2024, net sales were $4.95 billion, with Abercrombie net sales up 16% and Hollister up 15%. Abercrombie contributed around 60% of digital sales, while Hollister was around 30%.

• Full-year 2025 net sales expected to grow 3%-5% from $4.95 billion in 2024, with foreign currency impact around 70 basis points adverse. Operating margin expected 14%-15%.
• First quarter 2025 net sales expected to be up 4%-6% from Q1 2024's $1.02 billion. Operating margin expected 8%-9% due to higher freight costs and marketing spend. EPS expected $1.25-$1.45.
• Plan to repurchase around $100 million of shares per quarter in 2025, with a new $1.3 billion share repurchase authorization announced.
• Expect initial store openings and product launches for partnerships in 2025, like Abercrombie Kids with Haddad Brands and entry into India.

• Freight costs: Continued headwind in first half of 2025, with rates still up year-over-year; air usage from Q4 still on balance sheet. Potential for tariffs: U.S. tariffs on China, Canada, and Mexico expected to impact around $5 million in 2025.
• Foreign currency impact: Adverse impact of around 70 basis points expected for full-year 2025.

Q: How are you seeing current business trends given the macro environment out there and opportunities for core divisions?

A: 2024 was strong, with balanced growth across brands and regions. 2025 expects continued growth. Hollister strong, Abercrombie had more normalized spring transition but seeing green shoots.

Q: Talk about the cadence of the year and inventories?

A: Ending inventory up 22%, units up 6% to support sales. Freight, seasonal mix, and category mix contribute to inventory growth. Freight costs expected to normalize in back half.

Q: Elaborate on first quarter revenue growth guide and brand contribution?

A: First quarter expected to grow 4%-6%. Hollister had momentum, Abercrombie seeing green shoots in spring categories. Both brands expected to grow.

Q: Discuss sourcing and ability to chase/react?

A: Source in 17 countries, agile sourcing allows chasing and reacting all year. Teams read business weekly and can move product quickly across categories.

Q: Promotional activity and gross margin in Q4?

A: Q4 had freight pressures offsetting AUR growth. January had promotions due to weather, but seeing normalization.

Q: Store openings by region and brand?

A: Plan to open around 100 new experiences in 2025, net store opener. Tilt towards A&F and EMEA region, with returns from new stores high.