Shares of Abercrombie & Fitch erased early losses while Kohl's gapped up after both retailers beat sales and earnings expectations early Wednesday. The website Ape Wisdom showed Kohl's as the sixth most often mentioned Reddit stock at midday Wednesday.
Abercrombie earned $2.32 a share on a non-GAAP basis, a drop of 8% year over year, but above the consensus analyst estimate of $2.20. Sales rose 7% to $1.2 billion, also above views. Comparable-store sales increased 3%, which was above expectations.
The company raised its full-year sales growth forecast to 5%-7% from an earlier estimate of 3%-6%. It also raised the lower end of its EPS forecast to $10-$10.50 from $9.50-$10.50 a share. Abercrombie raised its outlook despite an estimated $90 million in tariff expenses for the full year. For the current quarter, it expects sales to grow 5%-7% with EPS of $2.05-$2.25.
"We continued to drive meaningful engagement with our teen customer in Hollister brands, growing 19% on strong summer and back-to-school demand," CEO Fran Horowitz said in the earnings release.
Abercrombie stock opened 10% lower, then reversed to modest gains in midday trading. The stock found support at its 50-day moving average, but remained below the downward-sloping 200-day line. The stock, one of the best-performing in 2023, has been trading below its 200-day line since January. The issue is not substantially followed as a Reddit stock.
The retailer has a 48 IBD Composite Rating.
Reddit Stock Kohl's Results
Kohl's reported fiscal second-quarter sales fell 5.1% year over year to $3.3 billion, while same-store sales fell 4.2%. Adjusted earnings of 56 cents a share fell 5% from the year-ago period.
Interim CEO Michael Bender said the retailer is making progress in its turnaround strategy, but has more work to do.
"These results reflect the continued progress we're making against our 2025 strategic initiatives," Bender told analysts in a conference call. "Now, while it's clear that these efforts are beginning to resonate with our customers, we also recognize that this performance is not yet where we aim to be."
Bender said the quarter ended strongly, thanks to improved performance in its digital business and proprietary-brand sales. Quarterly gross margin improved by about 30 basis points, while inventory fell by 5%.
Despite the improved sales trend, "we also recognize that consumers continue to be pressured and are being choiceful with their purchases," Bender added, per a transcript from FactSet. Lower- to middle-income customers remain the most challenged, while higher-income customers have been more resilient, he said.
Kohl's Stock, Outlook
"These lower to middle income customers continue to prioritize value and are trading down into lower opening price-point products," the CEO said. "Several of our key initiatives are focused on delivering greater value to these customers through investing in our proprietary brands and adding more coupon-eligible brands."
Kohl's expects some impact from tariffs in the second half of the fiscal year, and is trying to offset the cost.
For the full fiscal year, Kohl's forecast a 5%-6% decrease in net sales and 4%-5% lower same-store sales. Analysts had expected a 4.7% same-store sales drop. The company also expects adjusted operating margin of 2.5% to 2.7% and adjusted EPS of 50 cents to 80 cents. Analysts' consensus estimate was 44 cents a share.
The Reddit stock gapped up 18% Wednesday at midday, although it gave back some gains. Wednesday's stock action wasn't as dramatic as on July 22, when Kohl's got caught up in a meme-stock frenzy that saw shares more than double and it closed nearly 38% higher.
The company's Composite Rating is 58.
