The happenin' teen clothing retailer reported flat comps for December and impressed the market by upping its fourth-quarter guidance. In a sea of retailers reporting expectedly weak December comps, Abercrombie's results stand out. So do its shares, rising 13% today.
Total sales for December jumped 19% to $296 million. Comps were expected to decline 6.6%, especially given the disappointing 13% November drop. Coming in flat, then, was a nice surprise for Abercrombie.
Because of its better-than-expected comps and strong overall sales gain, the company upped its fourth-quarter earnings guidance to $0.86 to $0.88 a share. Its previous guidance was $0.79 a share, and analysts were looking for $0.80.
Abercrombie's non-promotional attitude seems to be paying off. The retailer hates lowering prices to compete, even when that's the game plan for every other store in the mall. Because of its goal to maintain an "aspirational" brand, it's committed to selling clothes at full price. It's all about protecting the brand.
The company has been criticized for its resistance to discount, but so far, it's working. Abercrombie was less promotional this year than last, and average transaction values were up 10%. Higher prices easily translated into higher margins, which drove the earnings improvement.
By sticking to its guns, Abercrombie pulled off a feat that will likely elude other retailers: a strong fourth quarter. Full results will be announced Feb. 18. At that point, we'll be able to see just how strong margins were and get a handle on the company's inventory and accounts receivable. For now, the retailer's results are as hot as its scantily clad models.
Disclaimer: LouAnn Lofton owns shares of Abercrombie & Fitch but wasn't lucky enough to actually see one of those holiday greeters in person.
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