Why Abercrombie & Fitch Co. Stock Popped Today

What happened

Shares of Abercrombie & Fitch Co. (NYSE: ANF) were flying higher today after the apparel retailer lifted its comparable sales guidance for the key holiday quarter this morning.

As a result, the stock was trading up 12.8% as of 2:45 p.m. EST Monday.

A teen couple sitting on the top of a pickup truck festooned with lights

Image source: Abercrombie & Fitch.

So what

Abercrombie said it now expected comparable sales to increase in the high single digits for the fourth quarter, up from a previous forecast of low-single-digit growth. The company also saw net sales increasing in the low teens, compared to a previous outlook of mid- to high-single-digit growth. The company maintained its gross margin guidance at 58.3%, down 100 basis points from a year ago, and said operating expense would be up slightly from $553.7 million a year ago, compared to guidance calling for a 1% decline, which management said was primarily due to volume-related expense on higher-than-anticipated sales.

CEO Fran Horowitz said, "We are pleased by our performance across all brands and channels during the holiday season, with continued strength at Hollister, and the Abercrombie brand on track to deliver positive comparable sales for the quarter."

Separately, the company said it planned to take a charge on repatriating earnings held abroad due to the recent tax bill, and said Arthur Martinez was stepping down as executive chairman, to be replaced by Terry Burman as non-executive chairman.

Now what

It's not surprising to see Abercrombie stock surge on expectations of high-single-digit comparable sales growth, especially during the key holiday quarter. It's a striking reversal for a company that was posting negative comps just a few quarters ago. Like much of the apparel retail sector, Abercrombie stock has surged since a strong earnings report in November, as bullish reports on holiday sales and the passage of the new tax law pushed sector stocks higher. Abercrombie shares have now more than doubled since lows it saw over the summer.

With cash held abroad coming back home to be invested and its corporate tax rate about to get sliced, Abercrombie shares could continue moving higher as it reaps benefits from those two factors.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.