Abercrombie & Fitch shares shed a quarter of their value on Wednesday after the clothing brand missed sales forecasts, adding to concerns about the health of bricks-and-mortar retail.
The US clothing chain said it was closing three more flagship stores — in Soho, New York, Fukuoka, Japan and Milan, Italy — alongside results that highlighted falling revenues from its overseas businesses.
Abercrombie & Fitch was once a favourite among young shoppers, known for its edgy branding and racy ad campaigns. But the Ohio-based retailer, which also runs Hollister, lost its lustre thanks in part to faltering international expansion and botched product launches. Falling footfall in shopping malls added to the pressure. Former merchandising chief Fran Horowitz was promoted to chief executive about two years ago to lead a turnround.
Figures published on Wednesday showed like-for-like sales in the three months to the start of May rose 4 per cent in the US, but fell 4 per cent internationally. That netted out at a 1 per cent gain for the group as a whole, missing forecasts for a 1.3 per cent rise. The company posted a net loss of $18.3m for the quarter, which narrowed from $41.5m a year earlier.
Despite the ensuing sell-off in the company’s New York-listed shares, Ms Horowitz told the Financial Times that Abercrombie & Fitch “really did deliver exactly what we said we’d do”.
She pointed to financial guidance set out about three months ago, including for comparable sales to rise between zero and 2 per cent. For the full year the company expects net revenues to rise between 2 and 4 per cent.
Ms Horowitz said that Abercrombie & Fitch’s flagship stores were “large and expensive” to run, but that the company planned to add about 40 smaller stores this year.
The figures follow a series of disappointing updates from mall-focused retailers and department stores that have raised questions about the health of the US consumer sector.
Shares in Canada Goose were also tumbling on Wednesday, down 28 per cent after the upmarket winter clothing group reported its slowest sales growth in eight quarters.
Trade tariffs from China have added to investor concerns about the outlook for non-food retail, which is also struggling to adapt to the digital era.
Nordstrom, Kohl’s and JC Penney last week reported falling quarterly sales that sent their share prices sharply lower. Recent earnings updates from Ralph Lauren and Foot Locker also underwhelmed.
Scott Lipesky, Abercrombie’& Fitch’s chief financial officer, noted that its shares tended to be volatile around results.
On a call with analysts, Mr Lipesky said sales in Asia had declined due in part to “internal mis-steps”, such as “not taking advantage of certain selling events in the region”.
The company’s first-quarter loss equated to $0.29 per diluted share, compared with $0.62 last time. By midday in New York shares in the company were down 25 per cent.
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