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Abercrombie & Fitch collapses on the stock market after entering losses and lowering forecasts

2022-05-24T15:42:56.428Z

Inflation is weighing on consumer fashion spending The impact of supply chain problems and cost increases turned fashion firm Abercrombie & Fitch's results red in the first quarter of its fiscal year, from February to April. The company lost 14.8 million in that quarter and has also lowered forecasts for the new year. Investors have fled and the stock was down more than 30% at the open on Wall Street. Retail firms are feeling a vise grip on them.



The impact of supply chain problems and cost increases turned fashion firm Abercrombie & Fitch's results red in the first quarter of its fiscal year, from February to April.

The company lost 14.8 million in that quarter and has also lowered forecasts for the new year.

Investors have fled and the stock was down more than 30% at the open on Wall Street.

Retail firms are feeling a vise grip on them.

On the supply side, its costs are skyrocketing due to the higher price of energy (especially since the war in Ukraine), bottlenecks in the supply chain and the rise in other expenses.

On the demand side, consumers have less and less real disposable income, since prices rise more than wages.

This is happening in much of the world, especially in the United States.

Several retail companies have announced disappointing results in recent weeks, including firms such as the giant Walmart or Target, more focused on food and basic consumption.

This Tuesday has been Abercrombie & Fitch, the fashion firm, which has been portrayed before investors and has come out badly.

Abercrombie suffered a loss of 14.8 million dollars (about 13.8 million euros), which compares with a net profit of 42.7 million dollars in the same period of the previous year, despite the fact that sales grew by 4%, to 812.8 million dollars, beating analysts' expectations.

A more uncertain future

The losses were not the only bad news.

The company said it expects full-year growth to be flat to 2%, rather than the 2% to 4% it previously forecast, despite a better-than-expected first quarter.

The company blames the impact of the exchange rate and the effect of inflation on consumer demand.

The firm has cut its full-year operating margin outlook to a range of 5%-6%, from a previous range of 7%-8%.

Abercrombie said the downgrade is due not only to the impact of currency and inflation, but also to rising freight and raw material costs.

They are the same factors that have led the company to suffer red numbers in the first quarter.

The higher distribution costs of its sales through the digital channel have also weighed.

Investors are also left a bit blind.

The company has said it will no longer publish annual or quarterly forecasts "in response to volatility in freight and other costs."

Abercrombie has increased its dependence on the US market, which already represents 72% of its sales.

They have grown by 6%, to 585.1 million dollars, while sales abroad remained frozen at 227 million, mainly due to the sharp drop in China due to the impact of the covid confinements.

The Abercrombie accounts are a warning that serves the entire industry.

The factors that affect the fashion business, such as the cost of raw materials and freight or the lower real disposable income of consumers, are extensible to the vast majority, although there are always some with greater capacity for adaptation and response what others.

Source: elparis

All business articles on 2022-05-24

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