An individual carries a bag from the Abercrombie & Fitch store on Fifth Avenue in Recent York City, February 27, 2017.
Andrew Kelly | Reuters
Abercrombie & Fitch shares fell greater than 30% Tuesday after the retailer reported an unexpected loss for its fiscal first quarter, with freight and product costs weighing on sales.
Abercrombie also slashed its sales outlook for fiscal 2022, anticipating that economic headwinds will remain a minimum of through the top of the 12 months. The news sent shares of apparel retailer American Eagle Outfitters down 10%, and Urban Outfitters down about 7%.
Abercrombie now sees revenue flat to up 2%, compared with a previous forecast of two% to 4% growth. Analysts had been in search of a year-over-year increase of three.5%, in accordance with Refinitiv consensus estimates.
Chief Executive Officer Fran Horowitz said in a press release that the retailer will manage its “expenses tightly” and seek for opportunities to offset the upper logistics costs within the near term. She also said Abercrombie plans to guard investments in marketing, technology and customer experiences.
Abercrombie joins a growing list of shops, including Walmart, Goal and Kohl’s, which might be seeing profits take a success as inflation hovers at a 40-year high. There are also concerns that inventories are starting to pile up, following months of supply chain backlogs, right as consumer demand for certain products is waning. Businesses like Abercrombie could possibly be forced to discount items to maneuver them off shelves.
Here’s how Abercrombie did for the three-month period ended April 30, compared with what Wall Street was anticipating, based on Refinitiv estimates:
- Loss per share: 27 cents adjusted vs. earnings of 8 cents expected
- Revenue: $813 million vs. $799 million expected
Abercrombie reported a net loss for its fiscal first quarter of $14.8 million, or 32 cents per share, compared with net income of $42.7 million, or 64 cents a share, a 12 months earlier.
Excluding one-time items, Abercrombie lost 27 cents per share. Analysts had expected the corporate to earn 8 cents a share throughout the quarter.
Sales grew 4% to $812.8 million from $781.4 million a 12 months earlier. That was ahead of expectations for $799 million.
Inside that figure, sales at Abercrombie’s Hollister banner fell 3% 12 months over 12 months, while those of its namesake label rose 13%.
Abercrombie’s inventories totaled $563 million as of April 30, up 45% from year-ago levels.
The retailer cut its outlook for fiscal-year operating margins to a variety of 5% to six%, down from a previous range of seven% to eight%. Abercrombie said the adjustment takes under consideration higher freight and raw material costs, foreign currency and lower sales attributable to an assumed inflationary impact on consumers.
Starting within the second quarter, Abercrombie said it should now not provide full-year or quarterly outlooks on gross profit rate or operating expenses, “in response to volatility in freight and other costs.”
Abercrombie shares were down 31% to $18.49 by Tuesday afternoon. The stock has fallen 23% 12 months to this point, as of Monday’s market close.