Macro headwinds and softening sales at Hollister pushed Abercrombie & Fitch Co. into the red for the second quarter, triggering the company to reduce its outlook for the third quarter and 2022 overall.
Hollister sales fell 15 percent to $436.9 million in the last quarter from $514.5 million in the year ago quarter.The stock market reacted strongly to the results and the revised outlook, pulling A&F’s shares down 5.6 percent, or $1.05, to $17.60 by midday.
Like other retailers, Abercrombie & Fitch Co. saw sales softening beginning in late June and continuing through July, as a result of lower and middle income Americans pinched by inflation, particularly in essentials like food and fuel. Macy’s, Kohl’s, Victoria’s Secret and Target also saw significant sales declines last quarter and lowered their guidance for the year, as did Abercrombie & Fitch.
Several retailers earlier this year ordered more merchandise than they actually needed, expecting that supply issues would delay some inventory and that an appropriate amount would arrive on time. However, with supply issues easing and consumer demand declining, retailers now find themselves stuck with too much inventory which they have to clear, meaning the third quarter will be super promotional, with markdowns taking down margins sharply.
The company is now forecasting 2022 net sales to be down mid-single-digits from $3.7 billion in 2021 compared to the previous outlook of flat to up 2 percent, driven by an assumed ongoing inflationary impact on consumer demand. The outlook also includes an estimated adverse impact of about 200 basis points from foreign currency.
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