Abercrombie & Fitch smashes profit forecasts, says Q1 off to a good start

The turnaround at Abercrombie & Fitch (ANF) continues, despite the company being hampered like other retailers due to the effects from the COVID-19 pandemic.

Shares of the youth apparel retailer fell slightly in Tuesday trading as the company thumped analyst estimates for gross margins and earnings in the fourth quarter of 2020. While the company's sales fell 5% year-over-year to $1.12 billion, profits were bolstered by a good number of store closures and better merchandise assortments at its namesake and Hollister divisions. Digital sales rose 34% from a year ago.

"Our product is resonating and our message is resonating," Abercrombie & Fitch CEO Fran Horowitz told Yahoo Finance Live in an exclusive interview. "We are pleased," Horowitz said on the start to the first quarter. "If you saw our plan for the first quarter, we are looking to grow sales 30% to 40% over last year."

Here's how Abercrombie & Fitch performed in the fourth quarter of 2020 compared to Wall Street estimates.

• Net Sales: $1.12 billion vs. $1.12 billion

• Gross Margin: 60.5% vs. 59.3%

• Adjusted Diluted EPS: $1.50 vs. $1.24

Similar to others in retail, sales were constrained by weak mall traffic in U.S. malls during the pandemic and store closures overseas (due to the pandemic).

Abercrombie & Fitch said it closed eight large flagship stores globally last year. It also shuttered 129 non-flagship stores. The company now has 735 stores in operation globally.

Horowitz told Yahoo Finance Live she will continue to evaluate the store base.

"There is no finish line on the number of stores. There are opportunities around the world to be in the right size [store] and on the right location. So no finish line, but it's really productivity call on reducing the square footage," Horowitz said.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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