Abercrombie & Fitch Reports Quarterly Loss On Higher Freight and Raw Materials Costs

Scott Peters
24 May, 2022
New York City

Abercrombie & Fitch reported net sales in the first quarter ending on April 30 rose 4% to $812.7 million and gross margin fell to 55.3% from 63.4% a year ago when sales were $781.4 million. 

The retailer reported an unexpected quarterly loss of $16.5 million or 32 cents from profit of $41.7 million or 67 cents a share.  

Gross profit margin rate declined 810 basis points after freight cost increased $80 million partially offset by higher unit average cost on lower promotions. 

Hollister branded goods declined 3% to $428.8 million and Abercrombie & Fitch branded goods rose 13% to $383.9 million. 

Store sales in the U.S. rose 6%, Europe and the Middle East area rose 3% but in the Asia Pacific region plunged 35%. 

Total international sales were flat in the quarter compared to a year ago at $227 million and the U.S. sales rose 6% to $585 million. 

Inventories at the end of the quarter soared 45% to $563 million due to increased in-transit inventory, higher units on hand, and increased average unit costs driven by freight compared to a year ago. 

In the quarter the company repurchased $100 million or 3.3 million of its shares and $258 million remaining in the repurchase program established in November 2021. 

Guidance and Outlook 

The retailer guided second quarter revenues to be down in low-single digits and for the full-year to be flat to up 2% from a year ago. 

The retailer also guided operating margin for the year to fall between 5% and 6% from the previous estimate between 7% and 8% on the account of higher freight and raw materials cost and lower sales due to an assumed inflationary impact on consumers.

 The operating margin in the second quarter is expected to fall between 3% and 4% on higher raw materials and freight costs and net sales to decline in low single-digits from a year ago. 

Company and Stock 

Abercrombie & Fitch is a specialty apparel retailer for men, women, and kids and operates 730 stores under five brands. 

Abercrombie & Fitch fell 26.2% to $19.96 after the apparel retailer reported earnings. 

In the year so far, Abercrombie & Fitch stock has declined 46.91% to $18.57.