There is good news at ANF. In the third quarter of 2017, the company reported 8% comparable store growth for its Hollister division and only a 2% drop for its Abercrombie division. Those are solid improvements over the previous quarter for both divisions and show a positive trend for the future. My own recent store visits support this optimism.
It is nice to see that both divisions now show much clearer definition of classifications, and there were highlights of styles that made shopping easier. In all instances, I saw less emphasis on markdowns and more focus on merchandising fashion statements. Management indicated that it is narrowing assortments and stressing depth in key items. That’s important for the growth of the business.
Total comparable store sales were up 4% in the quarter; a marked improvement compared to negative performances in prior quarters (a drop of 3% in the first quarter followed by a smaller decline of 1% in the second quarter.) Based on current trends, I expect total comparable sales to be up 4-5% in the final quarter of this year with Hollister again leading in the high single digits. Of note, the Abercrombie division is starting to show some new life; the 2% drop in comparable store sales this quarter showed progress after dropping 10% and 7% in the previous two quarters.
Management addressed the progress the company has made, climbing back after teetering on the edge of a cliff into oblivion. The comparable store sales improvement and a profit growth achieved through disciplined expense management point to the beginning of a stabilization of the business. In addition, e-commerce sales rose to 24% in the quarter. Combined, all of this is a good indication that the momentum of the company can increase both through internet and over the counter sales.
Net earnings per share rose 15 cents after dropping 90 cents and 16 cents in the previous two quarters. With the 53rd week this year, which should add about $40 million to the business, it is reasonable to estimate that the fourth quarter will yield 70 cents this year. Such results would certainly indicate a road to recovery.
There are very few specialty retailers that focus on young customers. American Eagle is another brand in this category. I feel that both companies have room to grow substantially in jeans, fleece and other casual wear. In addition, Hollister’s Gilly Hicks lingerie presentations are also impressive and create another source of growth. I like the future prospects for these brands.
