Abercrombie shares drop 30% as high costs dent margin forecast
By Deborah Mary Sophia
(Reuters) -Abercrombie & Fitch Co on Tuesday misplaced practically a 3rd of its market worth after the retailer lower its annual forecasts for gross sales and margins and posted a shock quarterly loss as a consequence of a surge in freight and uncooked materials prices.
Many years-high inflation has pushed shoppers to chop spending on discretionary items equivalent to attire, whereas persistent provide chain points, worsened by the battle in Ukraine, have dented earnings.
Abercrombie, which had airfreighted items to push its merchandise by a clogged provide chain for the important thing vacation season, was left with extra stock within the quarter after the festive interval.
To clear the inventory, the corporate supplied extra reductions and clearance gross sales, which additional crimped its margins within the quarter to 55.3% from 63.4% final yr.
“We’re in a particularly inflationary interval (the place)every part from meals to gasoline is costing extra and we count on these pressures to weigh on client confidence,” Chief Govt Fran Horowitz stated.
In distinction, high-end gamers together with Ralph Lauren and French model Chanel on Tuesday forecast upbeat 2022, as the businesses cushion the affect of inflation by value will increase.
Together with Tuesday’s losses, Abercrombie shares have fallen practically 44% this yr, extending final week’s declines after main retailers together with Walmart Inc and Kohl’s Corp flagged weakening demand for discretionary items.
“With no clearer outlook on the yr, not to mention 2023, we consider it will likely be laborious for share to recapture these losses,” William Blair analyst Dylan Carden wrote in a word, with Abercrombie executives saying they count on issues to remain the identical within the present quarter.
The millennial-focused retailer expects internet gross sales to be flat to up 2% in fiscal 2022, in contrast with its earlier forecast of a 2% to 4% progress. Analysts on common count on gross sales to extend 3.5% to $3.84 billion, in keeping with Refinitiv IBES information.
(Reporting by Deborah Sophia in Bengaluru; Enhancing by Vinay Dwivedi)
