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Abercrombie & Fitch seems to be on the rebound: after a record loss in the first quarter, the fashion group now reports a profit of 5.5 million dollars. Turnover, however, continues its drop.
Casual clothing gains momentul
Abercrombie & Fitch has been in a repositioning exercise, shedding its outdated naked torso image, and seems to be gaining ground. In the second quarter of its broken financial year, the American label reported a net profit of 5.5 million dollars (4.5 million euros), compared to last year’s loss of 31.1 million dollars. The result is all the more remarkable compared to the first semester, in which its losses were multiplied tenfold to 244.15 million dollars (220 million euros) – twice as much as expected.
The turnaround is remarkable, especially in these pandemic times – although the company seems to benefit from the coronavirus crisis: many people are forced to stay at home and they are now looking to buy comfortable casual clothing, CEO Fran Horowitz told the Financial Times. With its wide range of sweaters, hoodies and sweatpants, Abercrombie & Fitch is absolutely hitting the sweet spot.
Fewer costs in lockdown
Turnover did drop 17 % to 698.3 million dollars (585 million euros) due to the measures to counter the spread of Covid-19, but that was still better than analysts had expected. The boom in online sales (growing 56 % to 386 million dollars and now representing more than half of the group’s sales) was the main factor in that. European and Asian stores have generally reopened, but one in seven US stores is still closed.
Detrimental as it may be to turnover, the pandemic seems to have a positive effect on profit: costs have dropped significantly in almost every area, ranging from distribution costs (- 18 %) over general, administrative and marketing costs (- 16 %) to the suspension of certain rents and temporary employment for a lot of staff.
For this (third) quarter, CEO Horowitz expects a net turnover drop of 15 to 20 %. “We are listening, learning and evolving, and staying nimble in this unprecedented period of turmoil and uncertainty.” She remains positive though, seeing that whether they meet face to face or online via video chat, people still feel the need to show they are well.
