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Nov 26, 2019
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Abercrombie & Fitch trims forecast as Hollister, international business drag

By
Reuters
Published
Nov 26, 2019

Teen apparel retailer Abercrombie & Fitch Co trimmed its annual sales growth forecast on Tuesday, blaming political issues from Brexit to the Hong Kong protests for keeping customers away from its stores outside the United States.


Abercrombie & Fitch


Shares fell about 7% in early trading after the company also reported its first same-store sales miss in at least eight quarters at Hollister, a brand that has powered growth at the retailer.

Abercrombie joins a growing list of American retailers that have called out months of pro-democracy protests in Hong Kong for causing store closures and hurting revenue from the Asian shopping hub.

The company, which earns about 32% of its revenue from international markets, also said on a conference call that protests in Spain and France, as well as uncertainty around how Britain leaves the European Union dampened demand in Europe.

The Ohio-based company said it now expects net sales to be in the range of flat to up 1% for the full year, compared to a previous range of flat to up 2%.

Same-store sales at Hollister dropped 2% in the quarter, while analysts on average had estimated a 0.20% rise, according to IBES data from Refinitiv.

Sluggish demand for the surfwear-themed apparel brand offset a 3% rise in comparable stores sales at Abercrombie.

International comparable sales fell 8%, while overall same-store sales were flat, missing estimates of a 0.30% increase.

The company also said U.S. tariffs on Chinese imports are expected to impact merchandise cost and gross profit by about $4 million and $5 million in the fourth quarter and the full year, respectively.

The teen apparel maker said the current forecast assumes 16% of goods will be made in China, down from about 25% in fiscal 2018, as the company diversifies its sourcing.

Abercrombie reiterated that it would not raise prices to cushion the impact from the tariffs.

Net income attributable to the company fell to $6.5 million, or 10 cents per share, from $23.9 million, or 35 cents per share, a year earlier.

Excluding certain items, the company earned 23 cents per share, missing analysts’ average estimate of 24 cents.

Net sales rose marginally to $863.5 million, but missed Wall Street estimates of $868.4 million.
 

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