Abercrombie & Fitch Co experienced a 41.5 per cent decline in quarterly profit due to rising labor costs and inflationary pressures, despite a 3 per cent increase in sales.

The company's net income attributable to Abercrombie dropped to $38.3 million, or 75 cents per share, in Q4 from $65.5 million, or $1.12 per share, a year ago. Net sales for the fourth quarter reached $1.2 billion, an increase of 3 per cent on a reported basis and 5 per cent on a constant currency basis compared to last year. For the full year, net sales remained steady at $3.7 billion compared to last year, and increased by 2 per cent on a constant currency basis.

Abercrombie & Fitch credited the company's continued momentum in the Abercrombie & Fitch brand and improved performance in Hollister for its Q4 results. Despite significant inflation and economic disruption, the company's agile operating model enabled it to redirect expenses and inventory investments, leading to sequential sales growth in the last two quarters.

Abercrombie & Fitch also achieved 44 per cent digital penetration, growth in average unit retail (AUR), net store count growth, and a 4 per cent reduction in inventory to 2021.

Looking ahead, Abercrombie & Fitch is cautiously optimistic about consumer demand and believes its brands are well-positioned for growth. The company is pleased with its inventory levels and each brand is capable of chasing, although it does not anticipate any net product cost benefits in 2023.

As a result, Abercrombie & Fitch will continue to balance investing for the long-term with improving profitability by tightly managing expenses, inventory, and cash flow.