Abercrombie & Fitch cuts full-year sales forecast on tariff impact

By Aditi Sebastian (Reuters) - Abercrombie & Fitch Co cut its full-year sales forecast on Thursday after missing Wall Street estimates for the second quarter, as the U.S. apparel retailer bore the brunt of escalating trade tensions between Washington and Beijing. Shares of the Hollister brand owner tumbled as much as 14%, as the company also forecast a drop of 50 to 90 basis points in gross margins for the year, reversing its earlier expectations of a rise

Reuters August 30, 2019 02:05:55 IST
Abercrombie & Fitch cuts full-year sales forecast on tariff impact

Abercrombie amp Fitch cuts fullyear sales forecast on tariff impact

By Aditi Sebastian

(Reuters) - Abercrombie & Fitch Co cut its full-year sales forecast on Thursday after missing Wall Street estimates for the second quarter, as the U.S. apparel retailer bore the brunt of escalating trade tensions between Washington and Beijing.

Shares of the Hollister brand owner tumbled as much as 14%, as the company also forecast a drop of 50 to 90 basis points in gross margins for the year, reversing its earlier expectations of a rise.

Hundreds of U.S. businesses including retailers and footwear companies have urged President Donald Trump to scale back rather than escalate tariffs on Chinese goods, warning they would jack up consumer prices and trigger job losses.

Abercrombie said its forecast also accounted for Trump's most recent proposals for a rise in tariffs on $250 billion in goods to a 30% rate from 25%.

The company now expects full-year sales in the range of flat to up 2%, compared with its previous estimate of a 2% to 4% rise. The forecast also includes a hit of about $45 million from a stronger dollar.

The tariffs and currency impact were also expected to shave 60 basis points off Abercrombie's margins for the full year, the company said.

To cushion the blow, the teen apparel maker has been aiming to cut the amount of goods sourced from China to below 20% in fiscal 2019 from 25% a year earlier.

Chief Financial Officer Scott Lipesky told a post-earnings call that he saw a chance to reduce that number to the low teens in 2020.

The tariff worries come as the company, once known for being a mall-based retailer, tries to cope with a rapidly changing retail landscape.

Hollister, which has been a bright spot for the company in recent years, reported flat comparable sales missing analysts' estimates of a 1% rise, according to IBES data from Refinitiv.

For interactive graphic, click link : https://tmsnrt.rs/2NGpNhc

"Tariffs alone do not fully explain the guide down," Citigroup analyst Paul Lejuez said, adding the margin forecast suggests some "additional markdown pressure."

The company's comparable international sales fell 3%, taking a hit from protests in Hong Kong as well as concerns over Brexit.

Net sales slipped to $841.1 million from $842.4 million, below Wall Street expectations of $852.5 million for the second quarter ended Aug. 3.

Still, excluding items, the company posted a smaller-than- expected loss of 48 cents.

(Reporting by Aditi Sebastian in Bengaluru; Editing by Anil D'Silva)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.