Abercrombie & Fitch’s shares fell 14 per cent on Wednesday as it, along with other American retailers, predicted dismal yearly sales growth and cautioned reduced demand for its namesake brand coming into spring.
The brand stated that increased freight expenses and more sales at the beginning of the year to get rid of extra inventory would hurt profitability. It also noted that US tariffs had an impact of US $ 5 million on the brand.
In a post-earnings call, CEO Fran Horowitz echoed big-box retailer Target’s remarks about poor garment sales in February by stating that the shift into spring demand was “more normalised” this year, including a decline in sales for the A&F label.
The company anticipates a 3 per cent to 5 per cent yearly growth in net sales, which is less than the 6.77 per cent increase predicted by LSEG’s compiled data.
Abercrombie anticipates an operating margin of 14 per cent to 15 per cent in fiscal 2025, taking into account the effects of tariffs on Canada, Mexico, and China. By contrast, the operating margin for the year that ended on 1st February was 15 per cent.
In November, corporate management stated that exposure to Mexico is “immaterial” and the company imports between 5 per cent and 6 per cent of its goods from China. According to Abercrombie’s 2023 annual report, Vietnam accounts for 34 per cent of its item imports, with Cambodia and India rounding out the top three supplier nations.
Thanks to a 16 per cent increase in sales at its teen-focused Hollister brand, the company’s net sales of US $ 1.58 billion for the holiday quarter slightly exceeded market forecasts.
As Americans cut back on their spending on clothing due to persistently rising inflation, retailers such as Walmart and Home Depot have cautiously established their annual targets. Customers are also being negatively impacted by uncertainty about the possible consequences of President Donald Trump’s tariffs on goods imported into the US.
