Abercrombie shares drop 30% as high costs dent margin forecast
Reuters
Published May 24, 2022 07:35AM ET
Updated May 24, 2022 11:22AM ET
By Deborah Mary Sophia
(Reuters) -Abercrombie & Fitch Co on Tuesday lost nearly a third of its market value after the retailer cut its annual forecasts for sales and margins and posted a surprise quarterly loss due to a surge in freight and raw material costs.
Decades-high inflation has pushed consumers to cut spending on discretionary goods such as apparel, while persistent supply chain issues, worsened by the war in Ukraine, have dented profits.
Abercrombie, which had airfreighted goods to push its products through a clogged supply chain for the key holiday season, was left with excess inventory in the quarter after the festive period.
To clear the stock, the company offered more discounts and clearance sales, which further crimped its margins in the quarter to 55.3% from 63.4% last year.
"We are in an extremely inflationary period (where)everything from food to gas is costing more and we expect those pressures to weigh on consumer confidence," Chief Executive Fran Horowitz said.
In contrast, high-end players including Ralph Lauren (NYSE:RL) and French brand Chanel on Tuesday forecast upbeat 2022, as the companies cushion the impact of inflation through price increases.
Including Tuesday's losses, Abercrombie shares have fallen nearly 44% this year, extending last week's declines after major retailers including Walmart (NYSE:WMT) Inc and Kohl's Corp (NYSE:KSS) flagged weakening demand for discretionary goods.
"Without a clearer outlook on the year, let alone 2023, we believe it will be hard for share to recapture these losses," William Blair analyst Dylan Carden wrote in a note, with Abercrombie executives saying they expect things to stay the same in the current quarter.
The millennial-focused retailer expects net sales to be flat to up 2% in fiscal 2022, compared with its earlier forecast of a 2% to 4% growth. Analysts on average expect sales to increase 3.5% to $3.84 billion, according to Refinitiv IBES data.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.