What's driving Abercrombie & Fitch's turnaround?

Shares of Abercrombie & Fitch (ANF) are dipping Wednesday morning even as the company posted its robust fourth quarter report, with same-store sales rising 16% year over year. The company beat revenue expectations on both the top and bottom lines with a revenue of $1.45 billion versus an expected $1.43 billion.

Yahoo Finance Anchors Brad Smith and Seana Smith to discuss Abercrombie's turnaround and why the stock isn't seeing more movement despite the earnings report.

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Editor's note: This article was written by Nicholas Jacobino

Video Transcript

SEANA SMITH: Let's take a look at some other trending tickers on Yahoo Finance. First up, let's take a look at Abercrombie, because it was a blowout quarter from the retailer. The company reporting same store sales jumping 16% from a year ago, giving a first quarter sales growth guidance of low double digits.

Overall, though, a very strong report here from Abercrombie & Fitch, showing that nothing is slowing the momentum of this retailer. We know it has been a huge winner amongst Gen Z and Millennial customers. You might be asking yourself why we're not seeing a bigger reaction in the share price this morning shortly after the open.

Brad, this is a stock that has run up more than 400% over the last 12 months. So the turnaround plan under Fran Horowitz, the CEO there, clearly playing out. And analysts very encouraged by the progress that Abercrombie has shown so far.

BRAD SMITH: Yeah, just an absolute hat tip on this turnaround story. One of the huge things that jumps out to me, besides the fact that people are still purchasing jeans that are ripped at Hollister-- that was up 9%, by the way, during the quarter-- is the fact that Abercrombie is absolutely-- as a subset of Abercrombie & Fitch-- Abercrombie brands, they're expecting that to continue to outperform Hollister brands. And the Americas will continue to lead regional performance.

Just to put a number on that fiscal year, Abercrombie was up 27%. So 27% year-over-year growth that they saw at Abercrombie. And then, they're also expecting the year over year growth rate to be higher in the first half of the year, looking at some calendar shifts that they're citing there.

But once again, just-- I think, just a story in executive management and really looking at sensing the environment, looking at what's working well. And the mix and inventory that they really have to put into this market in an era where there is more direct to consumer, there is more competition, especially on digital, and making sure that the omnichannel approach is up to snuff and attracting some new potential customers.

Of course, we grew up going to the mall shopping this, but there are a lot of people just going on their phones shopping this now. So--

SEANA SMITH: Yeah, it's been so impressive just to see what Abercrombie has done when you compare the story today to what it was just a few years ago, right? You would find it very hard to find Millennials 5 or 10 years ago that were still shopping at Abercrombie, a store that they had shopped at during middle school, maybe even early years of high school.

And they're back now in their late 20s, in their early 30s, and they're spending their money at Abercrombie. So a total revamp there under Fran Horowitz. They've totally changed the marketing approach as well.

And it is working so far. It's reflected in those sales numbers that you were just going through. And Abercrombie, specifically, those comp sales-- they were up nearly 30%. Up 28% in the fourth quarter.

BRAD SMITH: I mean, just look. Rip jeans-- they never had me on rip jeans. I know we got to wrap.

SEANA SMITH: They're the trend.

BRAD SMITH: All right.

SEANA SMITH: People are spending on them.

BRAD SMITH: Yeah, I guess so. But do I pay 5% less for rip jeans than I would for a normal jeans--

SEANA SMITH: You sound like my dad.

BRAD SMITH: --with a full one? I'm just saying-- it's economics on my front. Stay tuned, 3:00 to 5:00 show, they're going to have the Executive Editor Brian Sozzi plus Abercrombie & Fitch CEO Fran Horowitz. We'll put the question to her. Should I pay a percentage less for rip jeans? Probably won't. There's much bigger things to discuss with her.