“Abercrombie & Fitch has a ‘cautiously optimistic’ outlook on demand for 2023.”

Abercrombie & Fitch Company (NYSE:ANF) said it is cautiously optimistic on consumer demand for 2023 after posting better-than-expected sales in the fourth quarter.

The company expects operating margins to be in the range of 4% to 5% this year, supported by strong US performance in particular. While freight and raw material costs are seen to have eased from 2022, this trend will be partially offset by higher expenses related to investments in growth plans for 2025.

Meanwhile, the Ohio-based owner of casual clothing chains Abercrombie Kids and Hollister expects net sales to stay flat at $813 million and operating margin to be between breakeven and 2% in the first quarter.

“We’re pleased with our inventory levels,” said CEO Fran Horowitz.

“As we look to 2023, we will continue to tightly manage our expenses, inventory and cash flow to balance investing for long-term growth while increasing profitability by expecting to see net product cost benefits.”

The outlook comes after fourth-quarter sales rose 3.3% YoY to $1.20 billion, slightly above Bloomberg’s $1.18 billion estimate, helped by demand for its namesake Abercrombie brand overcoming weakness at Hollister. Horowitz said the group faces “significant” challenges from rising inflation that threatens to curb retail spending on consumer products.

Adjusted earnings per share fell to $0.81 from $1.14 in the final three months of the previous year, missing analysts’ target of $0.86 per share.

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