Clothing & Shoes

Abercrombie & Fitch lowers forecast amid Q1 loss

However, the retailer delivered its highest Q1 net sales since 2014, despite APAC posting a loss of 35% from $46m (£36.73m) to $29m (£23.16m) in the quarter

Abercrombie and Fitch has lowered its forecast for 2022 with expectations for net sales to be flat to up 2% from $3.7bn (£2.95bn) in 2021, down from previous expectations of up 2%-4%, due to the impact from foreign currency and an assumed inflationary impact on consumer demand.

Net sales are also forecast to be down low-single-digits in the second quarter (Q2) of 2022, compared to $865m (£690.75m) in Q1 2021, following Covid-related lockdowns in China, higher freight and raw material costs, and inflationary pressures.

In the company’s latest trading update, Abercrombie and Fitch reported an operating loss of $10m (£7.98m) and $6m (£4.79m) on a reported and adjusted non-GAAP basis, respectively, for the first quarter ended 30 April 2022, compared to operating income of $57m (£45.51m) and $60m (£47.91m) respectively last year.

Additionally, the retailer’s gross profit rate declined approximately 810 basis points year-on-year to 55.3%, due to approximately $80m (£63.88m) of higher freight costs, partially offset by higher average unit retail on lower promotions.

Operating expenses, excluding other operating income, was also up 5% compared to last year. Abercrombie and Fitch said that approximately half of the increase was due to the lapping of Covid-related rent abatements and payroll credits last year, and the other half due to an increase in marketing and digital fulfilment expenses.

However, Abercrombie and Fitch reportedly delivered its highest Q1 net sales since 2014 with growth of 4% to $813m (£649.23m), compared to $781m (£623.68m) in the same period last year. Sales increased 13% from $339m (£270.71m) to $384m (£306.65m), however, Hollister posted a loss of 3% year-on-year from $442m (£352.96m) to $428m (£341.78m).

Overall, APAC posted a loss of 35% from $46m (£36.73m) to $29m (£23.16m) in Q1. Meanwhile, sales in the US rose 6% year-on-year from $554m (£442.4m) to $585m (£467.16m), and EMEA sales grew 3% from $159m (£126.97m) to $163m (£130.17m).

‘Other’ regions recorded the strongest growth of 50% from $22.5m (£17.97m) to $33.79m (£26.98m).

Fran Horowitz, chief executive officer, said: “Looking forward, we expect higher costs to remain a headwind through at least year-end.

“We will continue to manage expenses tightly and are committed to finding opportunities to offset these costs while protecting strategic investments in marketing, technology and our customer experience, which should drive sustained, long-term sales growth.”

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