Abercrombie & Fitch Sales Fall On Hollister Brand Weakness

Scott Peters
25 Aug, 2022
New York City

Abercrombie & Fitch declined 4.1% to $17.87 after the apparel retailer posted an unexpected quarterly loss. 

The apparel retailer said second quarter revenues declined 7% to $805 million after gross margin rate declined 730 basis points to 57.9%, driven by higher product costs and commodity inflation partially offset by higher average unit retail at Abercrombie.

Sustained lockdown conditions in several parts of China negatively impacted sales and elevated inflation also affected demand in Europe and the Middle East and in the U.S.  

Sales in the U.S. declined 4% and overall international sales dropped 14% driven by a 33% sales plunge in Asia Pacific and 13% in Europe and the Middle East. 

In the quarter, Hollister banner store sales declined 15% to $437 million and Abercrombie store sales rose 5% to $368 million.  

In the second quarter, the retailer swung to a loss of $14.7 million or 33 cents a diluted earnings per share from a profit of $110.5 million or $1.33 a share a year ago. 

Abercrombie & Fitch lowered its net sales outlook to be down mid-single-digits from $3.7 billion in 2021 compared to previous outlook of flat to up 2%. 

The parent of Hollister and Abercrombie estimated net sales in the third quarter to fall in high-single-digits from the third quarter level of 2021 level of $905 million.  

Inventories in the quarter shot up 70% to $708 million from a year ago as the company ordered items in advance to mitigate supply chain disruptions. 

In the quarter, the company returned approximately $18 million to shareholders through the repurchase of approximately one million shares.

In the fiscal-half ending in July 2022, the retailer purchased 4.3 million shares and returned $118 million to shareholders through share repurchases. 

The company has $240 million remaining on the share repurchase authorization established in November 2021.