• Net sales increased by 20% year-over-year, with a notable 30% growth in Abercrombie brands.

• Operating margin improved to 13.1%, a significant expansion from the previous year's third quarter.

• Net income per diluted share rose to $1.83, compared to a net loss per diluted share of $0.04 in the same quarter last year.

• Abercrombie & Fitch Co (NYSE:ANF) enhances full-year guidance, expecting continued growth and profitability.

On November 21, 2023, Abercrombie & Fitch Co (NYSE:ANF) released its 8-K filing, announcing a robust performance for the third quarter ended October 28, 2023. The company achieved a 20% increase in net sales, reaching $1.1 billion, and a comparable sales growth of 16%, compared to the same period last year. Abercrombie brands led the charge with a 30% increase, while Hollister brands also saw a solid 11% growth.

Financial Highlights and Performance Analysis

Abercrombie & Fitch Co (NYSE:ANF) reported a gross profit rate of 64.9%, which is approximately 570 basis points higher than the previous year. This improvement was primarily driven by a 250 basis point benefit from year-over-year average unit retail (AUR) growth, around 200 basis points from lower freight costs, and roughly 200 basis points in reduced inventory write-downs. However, these benefits were partially offset by an 80 basis point increase in raw material costs.

Operating expenses, excluding other operating loss, net, increased by $42 million or 8%, mainly due to higher incentive compensation, inflation, and investments in marketing and technology. Nevertheless, operating expense as a percentage of sales decreased to 51.7% from 57.3% last year, reflecting operating leverage.

The company's operating income stood at $138 million on a reported basis, a significant rise from $18 million and $21 million last year, on a reported and adjusted non-GAAP basis, respectively. Net income per diluted share was $1.83 on a reported basis, a stark improvement from a net loss per diluted share of $0.04 and net income per diluted share of $0.01 on a reported and adjusted non-GAAP basis, respectively, in the third quarter of 2022.

Financial Position, Liquidity, and Capital Allocation

As of October 28, 2023, Abercrombie & Fitch Co (NYSE:ANF) had cash and equivalents of $649 million and inventories of $595 million, which is a 20% decrease compared to the same time last year. The company's liquidity, including cash and borrowing available under the ABL Facility, stood at approximately $1.0 billion, up from $617 million as of October 29, 2022.

For the year-to-date period ended October 28, 2023, net cash provided by operating activities was $350 million. The company also spent $51 million to repurchase $50 million at par value of its outstanding senior secured notes. Capital expenditures are projected to be approximately $160 million for fiscal 2023.