Abercrombie shares tumble as sales sluggish, supply chain constraints hit retailer

Abercrombie shares tumble as sales sluggish, supply chain constraints hit retailer

Abercrombie & Fitch store in South Park Mall in Charlotte, North Carolina.

Chris Keane | Reuters

Shares of Abercrombie & Fitch fell nearly 10% on Thursday after the clothing retailer reported disappointing sales as more teens delay back-to-school clothing purchases.

The company, which also owns Hollister, has warned it continues to experience shipping delays and inventory constraints due to the temporary shutdown of overseas manufacturing facilities. And in the short term, it will depend on the results.

“Right now it’s tough there. All the articles you’ve read are genuine, ”CFO Scott Lipsky told analysts on a earnings conference call. “And those of us who are on this side of the fence live there every day.”

Lipesky said Abercrombie manages shipping delays of an average of one to three weeks, pulling as many deliveries as possible and leveraging air freight. However, he expects these moves to cost more in the second half of the year.

factory closed for a long time

The retailer expects manufacturing facilities in southern Vietnam, which have been closed due to the COVID pandemic, will open by next month or early in the fourth quarter.

“But it’s out of our control at this point,” Lipsky said.

For the fiscal second quarter, net income increased to $ 108.5 million, or $ 1.69 per share, from $ 5.46 million, or 9 cents per share, a year ago. Excluding one-off items, Abercrombie gained $ 1.70 a share, based on a Refinitiv analyst survey, the highest estimate for 77 cents.

Net sales rose 24% to $ 864.9 million from $ 698.3 million a year ago. It was below expectations of $ 879 million.

The company said sales of its Hollister, Gilli Hicks and Social Tourist brands grew 20% year-over-year, while their sales to Abercrombie were up 30%.

Compared to 2019 and pre-pandemic levels, the company said its revenue for the three-month period ended July 31 was up about 3%. In the United States, Abercrombie’s largest market, net sales increased 31% year-on-year and 11% year-over-year.

For its fiscal third quarter, Abercrombie is now asking for net sales to increase 2% to 4% from 2019 levels, to around $ 863 million.

Fiscal 2021 net sales are expected to be in the low to mid range, up from the $ 3.6 billion Abercrombie achieved in 2019.

back to school in slow motion

General manager Fran Horowitz told CNBC in a telephone interview that the retailer is currently experiencing a slow back-to-school season, with many consumers still holding back important clothing purchases.

Over the past season, she said, the retailer has tracked “peaks and troughs” spending patterns, with sales increasing before declining to decline. But this year, more teens seem to be adjusting to socializing and spending time on vacation before heading back to the mall.

“It’s a long season,” said Horowitz. “Right now, [consumers] Always shopping for shorts and t-shirts and even swimming, even if they didn’t wear them to school.

“The mindset is going to change over the next few weeks … as we go through Labor Day weekend and the New York area returns to school for the first time in two years,” said she declared.

Despite Thursday’s sell-off, shares of Abercrombie have risen more than 70% so far, bringing its market cap to $ 2.1 billion.



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