Shares of Abercrombie & Fitch soared Wednesday, even after the retailer slashed its profit outlook due to tariffs, which are expected to hit its business by $50 million.
In a news release, Abercrombie said sales reached a record high for the fiscal first quarter.
“Hollister brands led the performance with growth of 22%, achieving its best ever first quarter net sales, while Abercrombie brands net sales were down 4% against 31% sales growth in 2024.”
When asked in a CNBC interview if Abercrombie will implement broad-based price increases if those tariffs go into effect, Horowitz declined to answer.
During the quarter, sales at Hollister surged 22%, while comparable sales grew 23%.
Abercrombie and Fitch’s stock surged Wednesday, despite the retailer cutting its profit forecast due to tariffs that are predicted to cost it $50 million.
The company previously anticipated full-year earnings per share to be between $10.40 and $11.40, but now expects them to be between $9.50 and $10.50. According to LSEG, analysts were anticipating $10.33 per share in earnings.
In addition, Abercrombie lowered its operating margin projection, which is another indicator that investors closely monitor. Its operating margin used to range from 14 to 15 percent, but now it expects it to be between 12 and 13 percent.
The estimated effects of current tariffs, such as a 30 percent tariff on Chinese imports and a 10 percent levy on goods from dozens of other nations, are included in the company’s guidance. Other tariffs that are presently paused are not included.
Abercrombie’s shares, however, ended the day more than 14 percent higher after the company published revenue guidance that exceeded projections and fiscal first-quarter results that exceeded Wall Street’s expectations on both the top and bottom lines. At the beginning of Wednesday, the stock had dropped by almost 49% this year.
According to an analyst survey conducted by LSEG, the clothing company’s fiscal first quarter performance looked like this in comparison to expectations.
$1.59 in earnings per share compared to… $1.39 is anticipated.
Revenue: $1.10 billion for comparison. Expected is $1.07 billion.
A year ago, the company’s reported net income was $114 million, or $2.14 per share; for the three months ending May 3, it was $80.4 million, or $1.59 per share.
Sales increased by approximately 8% to $1.10 billion from $1.02 billion in the previous year. Abercrombie reported that sales for the fiscal first quarter hit a record high in a news release.
According to a statement from CEO Fran Horowitz, “this was above our expectations and was supported by broad-based growth across our three regions.”. While Abercrombie brands’ net sales decreased 4% compared to 2024’s 31% sales growth, Hollister brands led the performance with a 22% growth, setting a record for first-quarter net sales. “..”.
Apart from its profit forecast, Abercrombie increased its full-year sales guidance by a small amount. Previously, it anticipated revenue to increase by 3 to 6 percent, but now it expects it to increase by 3 to 5 percent. LSEG says that is significantly higher than the 3–3% growth forecast.
According to LSEG, Abercrombie expects sales to increase by 3 to 5 percent for the current quarter, which is consistent with high-end growth projections of 4 to 7%. In contrast to StreetAccount’s expectations of 14.1 percent, the company anticipates an operating margin of 12 to 13 percent. It predicts earnings per share to fall short of the $2.50 target, between $2.10 and $2.30.
Robert Ball, the finance chief, told analysts during a call that Abercrombie anticipates a $70 million hit from tariffs but will reduce it to $50 million through mitigation. Instead of planning “broad-based” price increases to offset the duties and preserve profits, the company is looking to diversify its sourcing network and is collaborating with its vendors to offset costs.
In an interview with CNBC, Ball stated, “The more diversified we get, the faster that we can be.”. “Dot, we are searching for ways to cut costs. throughout the company, but we’re doing so with a very clear eye toward safeguarding long-term investments for the company because we simply see a ton of long-term and worldwide potential for these brands. Thus, it’s a very cautious strategy. “.
According to Ball, Abercrombie used to source around 30% of its products from China prior to the pandemic, but now that percentage is in the low single digits. Vietnam, Cambodia, and India are currently its top trading partners; under President Donald Trump’s April proposal, all three countries would be subject to tariffs ranging from 26% to 49%.
While Trump negotiates trade agreements with each country, those tariffs are currently reduced to 10%. In a CNBC interview, Horowitz was asked if Abercrombie would raise prices widely if those tariffs were to take effect, but he chose not to respond.
Since everything is still hypothetical at this point, we won’t answer a hypothetical query. As soon as the circumstances materialize, we will deal with them,” she replied.
Tariffs will reduce Abercrombie’s profits, as evidenced by its weak guidance, but the company’s sales are also anticipated to suffer as it struggles with a slowdown at its namesake banner. Sales at Abercrombie fell 4% in the first quarter after growing 31% in the same period last year, despite the brand’s historic resurgence over the past few years being driven by its eponymous chain. In the meantime, Abercrombie’s comparable sales fell by 10%.
Horowitz admitted during the analyst call that Abercrombie’s performance was not up to par. She attributed it to the company having to reduce its winter inventory in order to sell it, which happened at a time when people are usually putting off buying new clothes following the holiday shopping season. Abercrombie’s sales and margin for the quarter were impacted by that discounting.
The company is also taking advantage of the successful launch of its wedding shop from a year ago. The product launch featured gowns and ensembles for the rehearsal dinner, the morning after brunch, and the bachelorette party, among other events related to the contemporary wedding.
“The other piece of it was up against, honestly, a spectacular launch of the wedding shop, which we just did not comp as well,” Horowitz stated. Therefore, even though our dresses were strong and sold, they didn’t sell as well as Dot. the store’s opening. “.
This year, Abercrombie opened a vacation store to capitalize on the success of its wedding clothes, which Horowitz anticipates will propel the company’s expansion.
“Earlier in the year, there was a really positive response to swimming. On the basis of our . model, we succeeded. “return to swimming in a much more significant manner,” Horowitz told CNBC. Additionally, we are able to expand a prearranged vacation shop by adding more resources and greater marketing. “.”.
The Abercrombie brand should resume its growth in the latter part of the year, according to her.
In comparison to its namesake banner, the company’s Hollister brand did significantly better. Hollister saw a 22 percent increase in sales during the quarter, while comparable sales increased by 23 percent. Abercrombie’s future growth is anticipated to be driven by the teen-focused chain.
