By Juveria Tabassum
(Reuters) -Abercrombie & Fitch forecast downbeat annual sales growth and margins as the apparel maker braces for weak consumer spending and the impact of U.S. tariffs, sending its shares down about 14% on Wednesday.
From Walmart (NYSE: WMT ) to Home Depot (NYSE: HD ), retailers have set their annual targets with caution despite enjoying a strong holiday season fueled by discounts and promotions, as consumers remain careful about spending on pricey apparel and other non-essentials.
Abercrombie banked on popular styles such as wide-legged jeans to attract consumers, but the retailer faced sales weakness at its namesake label, and echoed comments from Target on some softness in apparel demand in February.
Net sales at the A&F label rose 2% for the fourth quarter and dropped in February, CEO Fran Horowitz said on a post-earnings call.
"The initial print does not sow confidence," William Blair analyst Dylan Carden said.
Abercrombie expects annual net sales growth of 3% to 5%, below estimates for a 6.8% rise, according to data compiled by LSEG.
It forecast fiscal 2025 operating margin of 14% to 15%, including a $5 million impact from tariffs implemented on goods imported from China, Mexico, and Canada into the U.S.
Its operating margin was 15% for the year ended February 1.
Abercrombie imports about 5% to 6% of its goods from China and exposure to Mexico is "immaterial", company executives had said on a post-earnings call in November.
For the holiday quarter, the company reported net sales of $1.58 billion, edging past market expectations thanks to a 16% rise in sales at its teen-focused Hollister label.
Abercrombie’s adjusted profit per share of $3.57 beat estimates of $3.54, while its annual target of $10.40 to $11.40 was slightly above estimates.
The Ohio-based company also announced a new $1.3 billion stock buyback program, and said it was targeting about $100 million in share repurchases per quarter in 2025.
