Abercrombie shares tumble as sales disappoint, supply chain constraints hit retailer

Shares of Abercrombie & Fitch fell about 10% on Thursday after the clothing retailer reported disappointing sales as more teens delay back-to-school clothing purchases.

The company, which also owns Hollister, has warned it continues to experience shipping delays and inventory constraints due to the temporary shutdown of overseas manufacturing facilities. And in the short term, that will weigh on the results.

“Right now it’s tough. All the stories you read are real,” CFO Scott Lipesky told analysts on an earnings conference call. “And those of us on this side of the fence are experiencing it every day.”

Abercrombie manages shipping delays of one to three weeks, on average, advancing deliveries as much as possible and leveraging air freight when necessary, Lipesky said. However, he expects these measures to cause costs to increase in the second half of the year.

The retailer hopes manufacturing facilities in southern Vietnam, which have been shut down extended due to the Covid pandemic, will open by next month or early in the fourth quarter.

“But it’s out of our control at this point,” Lipesky said.

For the fiscal second quarter, net income reached $ 108.5 million, or $ 1.69 per share, from $ 5.46 million, or 9 cents per share, a year earlier. Excluding one-off items, Abercrombie gained $ 1.70 per share, beating estimates by 77 cents, based on an analyst survey by Refinitiv.

Net sales rose 24% to $ 864.9 million from $ 698.3 million a year earlier. It was below expectations of $ 879 million.

The company said sales of its Hollister, Gilly Hicks and Social Tourist brands grew 20% year-over-year, while they were up 30% at Abercrombie.

Compared to 2019 and pre-pandemic levels, the company said its revenue for the three-month period ended July 31 was up about 3%. In the United States, Abercrombie’s largest market, net sales increased 31% year-on-year and 11% year-over-year.

For its fiscal third quarter, Abercrombie is now calling for a 2-4% increase in net sales from 2019 levels of around $ 863 million.

Fiscal 2021 net sales are expected to be below average compared to Abercrombie’s $ 3.6 billion in 2019.

General manager Fran Horowitz told CNBC in a telephone interview that so far the retailer has seen a slow start to school, with many consumers still withholding major clothing purchases.

In past seasons, she said, the retailer has followed a “peak and trough” spending pattern, with sales rising before a drop in the fall. But this year, more teens seem to be readjusting to socializing and spending time on vacation before heading back to the mall.

“It’s an extended season,” said Horowitz. “Right now, [consumers] always buy shorts and t-shirts and even swim, even if they don’t wear them to school. “

“The mood is going to change over the next two weeks … as we go through Labor Day weekend and the New York area returns to school for the first time in two years,” she declared.

Despite Thursday’s sell-off, shares of Abercrombie have risen more than 70% year-to-date, bringing its market cap to $ 2.1 billion.