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Business

Abercrombie & Fitch stock is tanking on grim financial outlook

Shares of Abercrombie & Fitch plunged more than 30% after the teen apparel retailer, once known for its skimpily clad models, lowered its financial forecast, citing disappointing sales and rising costs.

The mall-based chain, which also owns Hollister and Gilly Hicks, slashed its sales outlook for the year, saying that revenues will remain flat or up 2% compared to its previous forecast of 2% to 4% growth.

Wall Street had been expecting 3.5% growth. The retailer reported a $14.8 million loss in the quarter ended April 30.

“Looking forward, we expect higher costs to remain a headwind through at least year-end,” said chief executive Fran Horowitz in a statement. “We will continue to manage expenses tightly,” she added.

The company blamed the loss on its increasing costs as inflation hits a 40-year high. It’s hardly alone as other major retailers including Walmart, Target and Kohl’s all flagged that consumers are spending more cautiously.

CEO, Fran Horowitz wearing a black dress.
CEO, Fran Horowitz, said the company will be managing its expenses “tightly.” Neilson Barnard

The slowdown in spending is contributing to A&Fs inventory buildup, the company said, pointing to a 45% increase compared to a year ago.

Overall sales at the New Albany, Ohio-based company rose by 4% in the quarter to $781 million while Hollister sales were down 3% compared to a year ago and Abercrombie & Fitch sales rose by 13%.

Horowitz, who has been CEO since 2017, was responsible for toning down the sexualized marketing at the company, spearheaded by her predecessor, Mike Jeffries. She’s ditched bare-chested male models, added plus-size models and leaned into the “body positivity” movement.

Jeffries embraced ads featuring beefy, shirtless men and a quarterly magazine that some considered soft-porn.

In March, Netflix released a documentary about that era in the late 1990s and early 2000’s called “White Hot: The Rise and Fall of Abercrombie & Fitch.”