By Juveria Tabassum (Reuters) -Abercrombie & Fitch joined other U.S. retailers in forecasting weak annual sales growth and warned of softer demand heading into spring for its namesake brand, sending its shares down 14% on Wednesday. The apparel maker said margins would take a hit from higher freight costs and more promotions at the start […]
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Abercrombie & Fitch deepens retail gloom with tepid forecast, shares drop
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By Juveria Tabassum
(Reuters) -Abercrombie & Fitch joined other U.S. retailers in forecasting weak annual sales growth and warned of softer demand heading into spring for its namesake brand, sending its shares down 14% on Wednesday.
The apparel maker said margins would take a hit from higher freight costs and more promotions at the start of the year to clear excess inventory. It also flagged a $5 million impact from U.S. tariffs.
The transition into spring demand was “more normalized” this year, including a drop in sales for the A&F label, CEO Fran Horowitz said during a post-earnings call, echoing big-box retailer Target’s comments on weak apparel sales in February.
“The initial print does not sow confidence,” William Blair analyst Dylan Carden said, adding that A&F brand sales, which rose 2% in the holiday quarter, could be headed for a drop in the future, putting Abercrombie’s full-year target at risk.
The company expects annual net sales growth of 3% to 5%, below expectations for a 6.77% rise, according to data compiled by LSEG.
Retailers from Walmart to Home Depot have set their annual targets with caution as still-high inflation forces Americans to spend less on apparel, home furnishing and electronics. Uncertainty around the potential fallout from President Donald Trump’s tariffs on goods imported into the U.S is also keeping shoppers on the back foot.
Abercrombie expects fiscal 2025 operating margin of 14% to 15%, including the impact from tariffs on China, Canada and Mexico. In comparison, operating margin was 15% for the year ended February 1.
The company imports about 5% to 6% of its goods from China and exposure to Mexico is “immaterial”, company executives had said in November.
It imports 34% of its merchandise from Vietnam, with Cambodia and India rounding off the top three supplier countries, according to Abercrombie’s 2023 annual report.
For the holiday quarter, the company’s net sales of $1.58 billion edged past market expectations thanks to a 16% rise in sales at its teen-focused Hollister brand.
Its adjusted profit per share of $3.57 beat estimates of $3.54, while its annual target of $10.40 to $11.40 was slightly above estimates.
The Ohio-based company also announced a new $1.3 billion stock buyback program.
(Reporting by Juveria Tabassum in Bengaluru; Editing by Devika Syamnath)