Fashion brand Abercrombie & Fitch advertising on a large scale digital billboard on the exterior of the Outernet building on 4th November 2024 in London, United Kingdom.
Mike Kemp | In Pictures | Getty Images
Shares of Abercrombie & Fitch soared on Wednesday, even after the retailer slashed its profit outlook due to tariffs, which are expected to hit its business by $50 million.
The company is now expecting full year earnings per share to be between $9.50 and $10.50, down from a previous range of between $10.40 and $11.40. Analysts were expecting earnings of $10.33 a share, according to LSEG.
Abercrombie also cut its operating margin forecast, another closely watched metric by investors. It’s now expecting its operating margin to be between 12.5% and 13.5%, down from a previous range of between 14% to 15%.
The company’s guidance includes the estimated impact from tariffs that are currently in effect, including a 30% tariff on imports from China and a 10% levy on goods from dozens of other countries. It excludes other currently paused tariffs.
Still, shares of Abercrombie soared 25% in premarket trading after the company issued first-quarter results that beat Wall Street’s expectations on the top and bottom lines and issued revenue guidance that beat forecasts. The stock had fallen nearly 49% this year entering Wednesday.
Here’s how the apparel company performed in the first quarter compared with expectations, based on a survey of analysts by LSEG:
- Earnings per share: $1.59 vs. $1.39 expected
- Revenue: $1.10 billion vs. $1.07 billion expected
The company’s reported net income for the three-month period that ended May 3 was $80.4 million, or $1.59 per share, compared with $114 million, or $2.14 per share, a year earlier.
Sales rose to $1.10 billion, up about 8% from $1.02 billion a year earlier. In a news release, Abercrombie said sales reached a record high for the fiscal first quarter.
“This was above our expectations and was supported by broad-based growth across our three regions,” CEO Fran Horowitz said in a statement. “Hollister brands led the performance with growth of 22%, achieving its best ever first quarter net sales, while Abercrombie brands net sales were down 4% against 31% sales growth in 2024.”
Beyond its profit outlook, Abercrombie slightly raised its full-year sales guidance and is now expecting revenue to rise between 3% and 6%, up from a previous range of between 3% and 5%. That’s largely ahead of expectations of 3.3% growth, according to LSEG.
For its current quarter, Abercrombie anticipates sales will rise between 3% and 5%, which is in line with expectations of 4.7% growth at the high end, according to LSEG. The company expects its operating margin to be between 12% and 13%, lower than expectations of 14.1%, according to StreetAccount. It anticipates earnings per share will be between $2.10 and $2.30, below expectations of $2.50.
Abercrombie’s weak guidance largely reflects how tariffs will cut into its profits, but its sales are also expected to take a hit as it contends with a slowdown at its namesake banner. Abercrombie’s eponymous chain fueled its historic comeback over the last few years, but sales fell 4% at the brand in the first quarter, following 31% growth in the year-ago period.
Meanwhile, comparable sales for the Abercrombie brand plunged 10%.
The slowing sales could simply be a normalization after Abercrombie’s supercharged growth, but they could also be a sign that the company is losing market share.
The company’s Hollister brand performed much better than its namesake banner. During the quarter, sales at Hollister surged 22%, while comparable sales grew 23%. The teen-focused chain is expected to drive Abercrombie’s growth ahead.
