Retailer Expects Higher Costs to Remain a Headwind Through Year-End
- Abercrombie & Fitch lowers its 2022 forecast
- Q1 net sales highest since 2014
- Operating loss in Q1
- Gross profit rate declined due to higher freight costs
- APAC posted a loss of 35%
- Sales growth in US and EMEA regions
- Higher operating expenses
- CEO Fran Horowitz remains optimistic
Abercrombie & Fitch has lowered its 2022 forecast, expecting net sales to be flat to up 2% from $3.7bn (£2.95bn) in 2021, down from previous expectations of up 2%-4%. The retailer reported an operating loss of $10m (£7.98m) and $6m (£4.79m) on a reported and adjusted non-GAAP basis for the first quarter ended 30 April 2022, compared to operating income of $57m (£45.51m) and $60m (£47.91m) respectively last year. Gross profit rate declined approximately 810 basis points year-on-year due to higher freight costs, partially offset by higher average unit retail on lower promotions. Operating expenses were up 5% compared to last year, with half of the increase attributed to Covid-related rent abatements and payroll credits and the other half due to increased marketing and digital fulfilment expenses. Abercrombie & Fitch reported its highest Q1 net sales since 2014, growing 4% to $813m (£649.23m) compared to $781m (£623.68m) in the same period last year. Hollister posted a loss of 3% from $442m (£352.96m) to $428m (£341.78m). APAC experienced a loss of 35% from $46m (£36.73m) to $29m (£23.16m), while sales in the US rose 6% year-on-year from $554m (£442.4m) to $585m (£467.16m). EMEA sales grew 3% from $159m (£126.97m) to $163m (£130.17m), and ‘Other’ regions recorded the strongest growth of 50% from $22.5m (£17.97m) to $33.79m (£26.98m). CEO Fran Horowitz remains optimistic, stating that they will manage expenses tightly and find opportunities to offset costs while protecting strategic investments in marketing, technology, and customer experience.
Factuality Level: 8
Factuality Justification: The article provides accurate and objective information about Abercrombie and Fitch’s financial performance, including net sales forecasts, operating losses, gross profit rate, and regional sales figures. It also includes a statement from the CEO regarding future plans to manage expenses and investments. The information is relevant and not sensationalized or misleading.
Noise Level: 7
Noise Justification: The article provides relevant information about Abercrombie and Fitch’s financial performance and outlook, but it could benefit from more in-depth analysis of the factors affecting the company’s performance and potential solutions to address these challenges. It also lacks actionable insights or new knowledge for readers.
Financial Relevance: Yes
Financial Markets Impacted: Abercrombie and Fitch’s stock price and the retail sector
Financial Rating Justification: The article discusses Abercrombie and Fitch’s lowered forecast for 2022 net sales, operating loss, and impact of foreign currency, inflation, and higher costs on their financial performance. This pertains to financial topics and can potentially impact the company’s stock price and the retail sector.
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: There is no extreme event mentioned in the article.
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