Release Date: March 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: How are you seeing current business trends given the macro environment, and what are the opportunities for the core Abercrombie and Hollister divisions in terms of pricing and category enhancements? A: Fran Horowitz, CEO, noted that 2024 was an outstanding year with balanced growth across brands and regions. For 2025, they are seeing positive trends in February, with Hollister performing strongly and Abercrombie showing some green shoots. The company remains agile, focusing on controlling what they can and chasing successful products. Scott Lipesky, COO, highlighted the global growth opportunity, particularly in international markets like the UK, Germany, and China. Robert Ball, CFO, emphasized a disciplined approach to pricing, maintaining healthy gross margins without significant price increases.
Q: Could you discuss the cadence of the year and how you're thinking about bridging the first quarter operating margins with the full year? Also, can you comment on inventory levels? A: Robert Ball, CFO, explained that inventory is up 22%, with units up 6% to support expected sales growth. The remaining increase is due to higher freight costs and a more normalized seasonal carryover inventory. Freight costs are expected to normalize in the second half of the year, flipping to a tailwind. The company is happy with its pricing architecture and expects to maintain healthy gross margins.
Q: Can you elaborate on the 4% to 6% first-quarter revenue growth guide and how each brand will contribute to comp growth? A: Fran Horowitz, CEO, stated that Hollister has greater momentum entering 2025, but both brands are expected to grow. They are seeing positive trends in categories like dresses, skirts, and swimwear. Robert Ball, CFO, added that the operating margin is expected to face some cost pressures in the first half, but these should abate as the year progresses.
Q: Could you quantify the freight drag in the first quarter versus the tailwind in the second half, and discuss inventory expectations for the year? A: Robert Ball, CFO, noted that freight contributes about 5 points to the inventory increase, with costs expected to normalize in the second half. Air usage was higher in Q4 to mitigate shipping disruptions, but is expected to decrease. Inventory levels are expected to align with sales growth, with units in line with sales by year-end.
Q: Can you discuss the promotional activity in Q4 and provide a bridge for the gross margin changes? A: Robert Ball, CFO, explained that freight was a significant pressure on gross margins, despite AUR growth. Promotions were up slightly in January to clear carryover inventory. The company expects promotional activity to normalize as the year progresses, with a focus on maintaining healthy AURs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.