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Abercrombie (ANF) Falls Back on Online Sales Amid Pandemic

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With social distancing becoming the new norm due to the coronavirus pandemic, consumers have taken to digital shopping, which in turn is boosting online sales. Catching up with the current trend, majority of retailers are improving their websites and mobile apps, and omni-channel capabilities to serve customers better. One such retailer is Abercrombie & Fitch Co. (ANF - Free Report) , which has witnessed robust digital growth overthe past few months.

Despite a sluggish top line in second-quarter fiscal 2020 owing to pandemic-induced store closures and consumers’ altered shopping habits, a solid online show provided Abercrombie with the much-needed shield. Even as stores reopened after almost seven long weeks following local health guidelines, the company continued to witness solid online performance. Digital net sales surged 56% year over year to $386 million in second-quarter fiscal 2020, representing nearly 55% of the top line. The upside can be mainly attributed to improved traffic, higher conversion and AUR.

Encouraged by the spike in online demand, management has increased focus on omni-channel shopping experience, including home delivery, buy online and pick-up in store, buy online ship to store facility, same day delivery as well as mobile app services. Notably, combined total visits to the company’s website and mobile app increased 25%. Also, app visits alone rose approximately 50% in the quarter.

Other retailers benefiting from the sudden surge in online sales include Hibbett Sports (HIBB - Free Report) , Gap (GPS - Free Report) and PVH Corp. (PVH - Free Report) . Notably, Hibbett’s online sales advanced 212.2% year over year in the fiscal second quarter on rise in new customers. Also, Gap’s e-commerce channel recorded 95% growth during the fiscal second quarter. Moreover, PVH Corp’s e-commerce sales improved more than 50% year over year during second-quarter fiscal 2020 driven by strong online sales growth in all regions, even after the reopening of stores.

Coming back to Abercrombie, the company reopened roughly 90% of its store base at the end of second-quarter fiscal 2020. In the United States, nearly 85% of the company’s store base opened at the end of the second quarter. The company’s entire store base opened in the EMEA region, while the APAC region had 96% of its stores open at the end of the quarter. Further, it has been making efforts to optimize store fleet to improve store productivity. So far through Aug 27, 2020, the company has closed 14 stores, while opening nine. This move will help reduce expenses by nearly $200 million this year.

All said, we believe that strong digital growth and improved trend in reopened stores are likely to aid this Zacks Rank #3 (Hold) stock, which has lost 21.3% year to date compared with the industry’s fallof 15.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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