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Abercrombie & Fitch’s outlook was lower than analysts’ expectations.
David Paul Morris/Bloomberg
Abercrombie & Fitch stock fell sharply Tuesday after the retailer widely missed Wall Street earnings expectations and lowered its full-year outlook.
The stock (ticker: ANF) dropped 29% to $19.09, its biggest one-day percent drop on record, according to Dow Jones Market Data. The stock hasn’t closed at this level since Nov. 13, 2020, when it fell to $18.06.
The adjusted fiscal first-quarter loss was 27 cents a share, lower than the 2 cents earnings analysts estimated, according to data provider FactSet. Revenue for the April ended quarter was $813 million, higher than the $799 million analysts’ were expecting.
Abercrombie’s gross profit margin—gross profit as a percentage of net sales—came in at 55.3%, down 810 basis points from the year-earlier quarter. (A basis point is 1/100th of a percentage point.) It attributed the drop to higher freight costs, which were roughly $80 million above last year and some $15 million above the company’s estimate.
Margins have been a focus for markets in the recent retail updates as investors assess the degree to which store groups have been able to pass along higher prices to consumers.
Last week, TJX Cos. (TJX) shares rose 7.1% after the retailer increased its prediction for adjusted pretax margin. But
Target
(TGT) stock plunged nearly 25% after management reported disappointing quarterly results and scaled back its forecast for margins for the full year.
For the full year, Abercrombie expects net sales to either match 2021 sales of $3.71 billion or rise 2%. This was lower than management’s previous outlook of up 2% to 4% and analysts’ expectation of 2.7%. The company blamed foreign currency headwinds and presumes lower consumer demand due to inflation.
Abercrombie said beginning this quarter it’s no longer providing a full-year outlook on gross profit rate. However, in the earnings call, the company noted that freight costs—the driver for last quarter’s margin drop—and raw material cost will remain elevated for the remainder of the year.
Neuberger Berman’s buy-side analyst John San Marco thinks retailers will continue to see declining margins as the cost of transporting goods continues to be a meaningful expense. Gap (GPS) and American Eagle Outfitters (AEO) report earnings on Thursday, while Victoria’s Secret (VSCO) reports early next week.
Write to Karishma Vanjani at [email protected]
