Abercrombie & FitchThe growth story begins to slow down.
The apparel retailer has released weaker guidance for the current quarter and fiscal 2025 and said it expects its sales to grow slower than Wall Street expected.
According to LSEG, Abercrombie expects sales in fiscal 2025 to be between 3% and 5%, well below the 6.8% increase estimate. In the current quarter, the company expects earnings per share between $1.25 and $1.45, with an expected $1.97.
The company’s shares fell more than 7% in listing trading.
Aside from guidance, Abercrombie nearly beat Wall Street expectations in the fourth quarter. According to an LSEG survey of analysts, retailers compare to Wall Street expectations, this is how retailers perform:
- Earnings per share: $3.57 vs. $3.54 Expected
- income: $1.58 billion Estimated to be $1.57 billion
The company reported three-month net revenue ending at $187 million, or $3.57 per share, compared with a year ago ($158 million or $2.97 per share).
Sales rose to $1.58 billion, up 9% from $1.45 billion a year ago. Like other retailers, Abercrombie benefited from the additional sales week a year ago. This is a negative comparison for many companies, but even after a week of sales, Abercrombie’s sales jumped.
Aside from sales and earnings, Abercrombie said it expects another key metric (operating margin) to be lower than the current quarterly forecast Wall Street. According to StreetAccount, Abercrombie expects its operating margin to be between 8% and 9%, well behind 12.8%.
In January, Abercrombie proposed An investor glance Entering holiday performance when it released early results and improved outlook for the fourth quarter. Nevertheless, its stock did not fall on the day as forecasts suggest Abercrombie expects its growth to be moderate and believes its operating margins will not exceed previous forecasts. Concerns about its operating margins may now increase after Abercrombie released its fiscal first-quarter guidance.
However, not all Abercrombie’s guidance was disappointing. According to LSEG, sales will grow 4% to 6% in the current quarter, meeting expectations of 5.8%. Over the entire year, it expects earnings between $10.40 and $11.40 per share, while mid-to-high-end revenue will be higher than expected at $10.83 per share.
After about two years of explosive stock and sales growth, Abercrombie’s business appears to be upgrading, and the market may shift from retail’s biggest superstars rather than rising immediately.
The company is still growing and is working to build an international market, but it is unclear whether it will still see the blockbuster numbers it has been publishing since the turnaround was implemented under CEO Fran Horowitz. It faces a tough last year comparison, and some of the buzz of turnover may start to fade away.
Additionally, consumers have been clearly cautious since the beginning of the year, which always puts pressure on professional retailers who sell discretionary goods such as clothing. Geopolitics, unusually cool weather and massive tragedies like wildfires in Los Angeles, have weakened consumer demand, but shoppers are also worried about things like rising tariff prices. In February, consumer confidence fell to its lowest level since 2021.
This slowdown is the sharpest on Abercrombie’s banner, the banner grew stronger in the early stage than Hollister, and the company’s chain is more suitable for teenagers.
During the quarter, Abercrombie’s sales rose 2%, while Hollister’s sales rose 16%. Abercrombie’s comparable sales rose 5%, while Hollister Comps soared 24%.
The results mark a turning point for the company and suggest that Hollister Brand may once again be a more important growth driver. It also puts more pressure on management to stimulate the Abercrombie brand and ensure it doesn’t stagnate.
For many other companies, including Target and Elf beauty. Like the elves, Abercrombie may see the impact of the proposed Tiktok Ban, which delayed cosmetics companies’ performance at the beginning of the year.
Both companies rely heavily on Tiktok for marketing. In February, ELF CEO Tarang Amin told CNBC that he suspected the proposed ban Affected cosmetics sales Because people don’t post videos like “Prepare with Me” or clothing runs, this can drive sales.
In a January press release, Horowitz said moving forward, Abercrombie will focus more on improving profits than sales as it hopes to “drive long-term shareholder value.”
“After projecting double-digit online and bottom-line growth for two years, I am as confident as ever about the power of our brand and operating model and, supported by the outstanding capabilities we have built, my progress in our move forward,” Horowitz said. “In 2025, we will continue to grow sustainably, profitable by executing scripts to win and retain customers around the world. Our goal is to leverage your healthy margin structure and balance sheet to grow revenue and earnings per share at a faster pace than sales.”
The proposal came true on Wednesday, when Abercrombie announced a $1.3 billion share buyback mandate and said it was expected to spend $400 million in 2025.
