The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
NEW ALBANY, United States — Teen apparel retailer Abercrombie & Fitch Co trimmed its annual sales growth forecast on Tuesday, blaming political issues ranging from Brexit to Hong Kong protests for keeping customers away from its stores outside the United States.
Shares fell as much as 8 percent after the company also reported its first same-store sales drop in at least eight quarters at Hollister, a brand that has powered much of the retailer's growth.
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 percent 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.
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The Ohio-based company said it now expects net sales to be in the range of flat to up 1 percent for the full year, compared with a previous range of flat to up 2 percent.
Abercrombie has in the past relied on Hollister to generate the bulk of its revenue with its denim and Gilly Hicks lingerie collections, but the surfwear-themed brand is no longer attracting as much demand from younger customers.
"Their fashion was a little bit off course for their customer," said Gabriella Santaniello, founder of retail research firm a-line Partners. "Hollister was sort of their golden child ... (so) the reversal in the sales trends there is a bit concerning."
Same-store sales at Hollister dropped 2 percent in the quarter, while analysts on average had estimated a 0.20 percent rise, according to IBES data from Refinitiv.
Sluggish demand for Hollister offset a 3 percent rise in comparable stores sales at Abercrombie unit, while international comparable sales fell 8 percent.
The company also said U.S. tariffs on Chinese imports are expected to impact merchandise cost and gross profit by about $4 million in the fourth quarter and about $5 million in the full year.
The teen apparel maker said the current forecast assumes 16 percent of goods will be made in China, down from about 25 percent in fiscal 2018.
Net income attributable to the company fell to $6.5 million from $23.9 million a year earlier.
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Excluding items, the company earned 23 cents per share, narrowly missing analysts' estimate of 24 cents.
Net sales rose marginally to $863.5 million, but also missed Wall Street estimates.
By: Aditi Sebastian; Editing by Sriraj Kalluvila and Anil D'Silva
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