Abercrombie & Fitch Company (NASDAQ: ANF) experienced a notable decline in its stock price on Monday after announcing a business update concerning the holiday season and revising its forecast for the fiscal year 2025. The company detailed its current sales performance and adjusted its full-year financial guidance, which influenced market sentiment and prompted substantial selling pressure on its shares.
The retailer indicated that its net sales for the quarter to date through December are in line with its internal expectations, suggesting stable demand during the critical holiday season. However, despite this alignment with projected sales, the company took a cautious approach by narrowing the anticipated net sales growth range for the entire fiscal year. Originally estimating net sales to grow between 6% and 7%, Abercrombie & Fitch now projects growth at the lower threshold of 6%.
Alongside the trimmed sales forecast, the company also adjusted its operating margin outlook downward by approximately half a percentage point, anticipating an operating margin near 13% for fiscal 2025. This tightening of margin expectations signals a recognition of increased cost pressures or other operational challenges impacting profitability.
Abercrombie & Fitch’s Chief Executive Officer, Fran Horowitz, expressed confidence in the company’s trajectory despite these revisions, emphasizing that the firm remains on course for "another year of significant progress," aiming to achieve record net sales and maintain consistency in meeting corporate goals.
In a notable development, the company increased its guidance for net income per diluted share, suggesting improved earnings performance despite moderated top-line growth and margin pressure. However, this positive adjustment is tempered by an announcement that Abercrombie & Fitch expects to incur approximately $20 million more in expenses than previously projected.
A major factor influencing the company’s updated forecast is the ongoing impact of tariffs. Abercrombie & Fitch has incorporated estimated tariff expenses into its outlook based on current trade policies. The retailer is allocating roughly $90 million to mitigate these tariff-related costs, which corresponds to nearly 1.7% of its net sales. While current tariff impacts are factored into the guidance, the company cautioned that its projections do not account for any future alterations to trade policies that could be introduced by the United States or other countries, highlighting a significant source of uncertainty.
Market reaction to Abercrombie & Fitch’s update was swift and negative. As of the time of reporting, ANF shares were down over 15%, trading at approximately $105.87. This substantial price decline reflects investor concerns about the narrowed sales and margin expectations, increased costs, and tariff-related risks.
The current performance underscores the sensitivity of retail stocks like Abercrombie & Fitch to changes in company guidance and external economic factors such as tariffs. The company’s recalibration of its outlook amid these headwinds is indicative of an evolving operating environment that investors are closely monitoring.
Key Points:
- Abercrombie & Fitch reported quarter-to-date net sales through December consistent with company expectations.
- The full-year net sales growth forecast was narrowed from a 6%-7% range to a precise 6%.
- Operating margin guidance was reduced by half a percentage point to an anticipated 13%.
- The company increased its net income per diluted share guidance but expects $20 million higher expenses than previously expected.
Risks and Uncertainties:
- The company’s outlook includes an estimated $90 million tariff-related expense, equating to about 1.7% of net sales.
- Guidance does not incorporate potential future trade policy changes from the U.S. or other countries, representing an ongoing risk.
- Decreased operating margin expectations suggest pressure from increased costs or operational challenges.
- Market perception remains sensitive to fluctuations in guidance amid uncertain external economic conditions.
Disclosure: This article is based on company filings and market data as of publication and does not constitute investment advice.