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Abercrombie and American Eagle post uplifting results ahead of Black Friday as inventory trends improve

Wednesday, November 23, 2022 by Robinhood Snacks |
The old Fitch (Justin Sullivan/Getty Images)

The old Fitch (Justin Sullivan/Getty Images)

Stop trying to make Fitch happen… It’s already happening. Abercrombie & Fitch was long known for overpowering cologne scents, shirtless mall models, and a dubious corporate culture. In the early 2000s, it was the go-to “cool brand” for tweens everywhere. Then Abercrombie logos became very uncool and it fell off the map. After a major rebrand focused on inclusivity, Abercrombie’s back with a denim-twinged vengeance:

  • Abercrombie shares surged 20% yesterday after it reported a surprise quarterly profit and beat sales expectations as demand for office jeans and date dresses rebounded.
  • That’s so Fitch: While Abercrombie’s global sales ticked down, US sales were up from last year and its namesake brand saw 10% global growth.
  • Cali casual < East Coast chic: Hollister makes up more than half of Abercrombie’s total sales, but revenue for the casual sister brand fell 12%.

Pre-Black Friday flex… Abercrombie isn’t the only retailer wowing investors with its preholiday quarter. American Eagle stock soared 17% yesterday after the Aerie-owner beat quarterly profit estimates while toning down its inventory levels (think: higher markdowns). AE’s inventory was up just 8% from last year, compared to 36% in the previous quarter. While sales and profits at AE and Abercrombie fell, right-sizing inventory helped them exceed expectations.

THE TAKEAWAY

Black Friday is an opportunity… for retailers to get their inventories right. First, the problem was too little merchandise as pandemic supply-chain snags collided with rebounding demand. Then it was too much merch as inventories recovered while demand sagged (picture: piles of unsold summer dresses in December). AE expects this holiday season to be “highly promotional,” which reduces profit margins. But clearing out supplies can help retailers stay relevant with shoppers — and reduce profit-draining overstock long term.