Apparel retailer Abercrombie sees weaker sales, margins as inflation bites

[May 24, 2022]    (Reuters) -Abercrombie & Fitch Co trimmed its full-year sales forecast on Tuesday as record-high inflation hits demand for the retailer's jeans, tops and dresses, sending its shares down 18% in premarket trade.

Demand for discretionary goods has taken a hit as consumers prioritize spending on essentials such as food and gas whose prices have been surging due to supply chain snarls and the Russia-Ukraine war.

Abercrombie joined some of the top U.S. retailers in flagging a hit to margins from decades-high inflation, with Walmart Inc and department store chain Kohl's Corp trimming their profit targets last week.

"We expect higher costs to remain a headwind through at least year-end," Abercrombie Chief Executive Officer Fran Horowitz said.

The company now expects net sales to be flat to up 2% in fiscal 2022, compared with its earlier forecast of a 2% to 4% growth. Analysts on average expect sales to increase 3.5% to $3.84 billion, according to Refinitiv IBES data.

It expects full-year operating margin between 5% and 6%, down from its previous outlook of 7% to 8%, reflecting a 200-basis-point hit from higher freight and raw material costs and lower sales.

(Reporting by Deborah Sophia in Bengaluru; Editing by Vinay Dwivedi)

 

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