Abercrombie & Fitch warns of ‘adverse’ tariff impact

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Abercrombie & Fitch warns of ‘adverse’ tariff impact

By Marianne Wilson - 08/29/2019
Abercrombie & Fitch reported a wider second-quarter loss amid flagship closing costs and cut its full-year sales forecast citing the “direct adverse impact” it expects tariffs to have on the cost of merchandise.

The apparel retailer reported net losses of $31.14 million, or $0.48 a share, in the quarter ended August 3, after a loss of $3.85 million, or $0.6 a share, in the year-ago period. The result reflects a 50-cent charge for flagship store exit charges. Analysts had estimated a loss of $0.53.

Net sales fell 0.2% to $841.1 million from $842.4 million, missing estimates of $852.5 million. Same-store sales were flat.

“Trends improved throughout the second quarter, enabling us to deliver constant currency revenue growth and meet our previously-issued comp and gross profit rate outlook, while continuing to tightly manage expenses,” said CEO Fran Horowitz. “Importantly, we have had a solid start to back-to-school in the U.S. and we look forward to building on that momentum in the back half through exciting product and cohesive marketing campaigns."

In the second quarter, Abercrombie said it delivered 26 new store experiences, closed its Hollister SoHo flagship store in Manhattan, realized double-digit digital sales growth, continued to invest in key personalization tools and grew its loyalty membership accounts across brands.

“We plan to build on these actions as we continue to lay the foundation to achieving our fiscal 2020 target,” said Horowitz.

For the third quarter, Abercrombie expects sales to be up about 1% and same-store sales to be about flat. For the year, the retailer expects sales to be in the range of flat to 2% growth and same-store sales of flat to 2% growth. The retailer said its outlook takes the impact of tariffs on Chinese goods into account.

“The imposition of these additional List 3 tariffs, which are scheduled to begin October 1, 2019, and List 4 tariffs, which are scheduled to begin September 1, 2019, are expected to have a direct adverse impact on cost of merchandise and gross profit of approximately $6 million for the fall season,” the retailer stated.

In a separate announcement, Abercrombie announced two key senior hires to lead its Europe, Middle East, and Africa (EMEA) and Asia-Pacific (APAC) regions. Daniel Le Vesconte and Olga Wu recently joined the company as group VPs, overseeing the company’s EMEA and APAC operations, respectively. The new roles will both report to Kristin Scott, president, global brands, and will be responsible for executing the company’s brand strategies to drive growth in their respective local markets.