New York CNN –
Abercrombie & Fitch (ANF) shares rose more than 30% on Wednesday after the mall retailer released a stellar first-quarter earnings report.
Abercrombie beat analyst estimates, reported surprise earnings and raised its full-year outlook. The numbers show that despite growing economic uncertainty, the US consumer is willing to spend money on non-consumer items like acid-washed jeans and polo shirts.
“Abercrombie’s offering is resonating with our target customer and setting several additional sales records across gender, categories and geographies this quarter,” Chief Executive Officer Fran Horowitz said in a statement Wednesday.
The company reported net income of $16.57 million for the first quarter. That’s an improvement from a $16.46 million loss last year. Revenue also increased to $836 million compared to $812.8 million a year earlier.
Same-store sales increased 3%. Analysts had forecast a 1% decline.
The retailer also said it expects net sales growth of between 2% and 4% this year, up from previous estimates of 1% to 3%.
The Gangbusters report comes at a time when other consumer discretionary retailers have reported a slowdown in consumer spending this season as some of the largest retailers warn of looming trouble, US bank accounts are shrinking and debt is mounting.
Why is Abercrombie & Fitch doing better this quarter?
“At a senior level, the answer lies in the skills and attitude of management,” wrote Neil Saunders, managing director of GlobalData, on Wednesday. “Executives are very consumer focused and always interested in understanding what they want. Once they realize this, they know how to do it in an efficient and effective way.”
Abercrombie was a controversial part of teenage wardrobes in the 1990s and 2000s. The sexualized advertising featuring young shirtless male models made the brand a preppy status symbol for high school students. And it prided itself on being exclusive, refusing to make size XL or XXL for years. (A recent documentary on Netflix details the country’s culture, which has racism and discrimination.)
 "Abercrombie & Fitch shares surge 30% on stellar earnings report 3")
“We are looking for the cool kids. We’re looking for the attractive, all-American kid with a great attitude and lots of friends,” former CEO Mike Jeffries said in 2006. “Are we exclusive? Absolutely.”
But the brand turned off shoppers, and fast-fashion stores like H&M sprang up to win them over during and after the 2008 recession. Sales plummeted, and by the time Jeffries left as CEO in 2014, the brand was toxic and had settled lawsuits alleging racial and gender discrimination and harassment.
But the brand has worked hard over the past decade to shake off that reputation and focus on marketing casual, relaxed clothing in size-inclusive options.
“The brand is now light years from its rather battered past and continues to attract new shoppers interested in its compelling ranges,” Saunders wrote.