Abercrombie lowers sales forecast amid Hollister pressures
Sales in the second quarter dropped 7% to $805m (£683.2m), and Hollister posted a 15% drop in sales to $436.9m (£370.8m)
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Abercrombie and Fitch Co. has lowered its sales forecast for FY22, with sales expected to be down mid single-digits from $3.7bn (£3.1bn) in FY21, compared with the previous outlook of flat to up 2%. Its sales forecast for the third quarter (Q3) has also lowered to high single-digits at $905m (£768m).
The company’s operating margin is now expected to be in the range of 1%-3%, down from the previous outlook of 5%-6%. This comes as Hollister has seen “greater than anticipated” impact from inflation and a shift away from core categories to more fashion-driven products, contributing to lower-than-expected conversion and basket size.
Operating income is also expected to be around break-even with the year-over-year decline driven by lower sales and an assumption of lower average unit retail (AURs) needed to keep inventory current.
The announcement comes as Abercrombie and Fitch announced a 7% decline in net sales to $805m (£683.2m) for the second quarter ended 30 July 2022 (Q2). Particularly, Hollister posted a 15% drop in sales to $436.9m (£370.8m).
Operating expenses were up 4% year-on-year, driven by inflation and higher digital fulfilment expenses partially offset by lower incentive-based compensation. The company also suffered an operating loss of $2m (£1.69m) compared to operating income of $115m (£9.76m).
Abercrombie and Fitch said that mitigating these factors will be actions to reduce certain expenses, and adjust inventory receipt levels and cadence by region in response to current market forces.
Fran Horowitz, chief executive officer, said: “As the global macro environment deteriorated in the second quarter, we experienced a divergence in brand performance. Abercrombie delivered its highest Q2 sales since 2015 and its ninth consecutive quarter of AUR growth.
“We expect macro headwinds to persist and have taken action to adjust receipts across brands to fuel winning categories for late fall and holiday. In addition, we have right-sized the Hollister inventory receipt plan for holiday and beyond. Looking ahead, we will continue to monitor sales volumes and react with agility to ensure inventory turns appropriately.”
