Abercrombie & Fitch’s growth trajectory is showing signs of deceleration. The apparel retailer has issued a weaker-than-expected outlook for its current quarter and fiscal 2025, projecting slower sales growth than Wall Street had anticipated. The company expects sales to increase between 3% and 5% in fiscal 2025, significantly below the estimated 6.8% growth according to LSEG. For the current quarter, Abercrombie forecasts earnings per share between $1.25 and $1.45, falling short of the anticipated $1.97. Shares dropped nearly 5% in premarket trading following the announcement.
Despite the underwhelming guidance, Abercrombie narrowly surpassed Wall Street’s expectations for its fiscal fourth quarter. According to LSEG’s analyst survey, the company reported earnings per share of $3.57 compared to the expected $3.54, and revenue of $1.58 billion versus the anticipated $1.57 billion. Net income for the quarter ending February 1 was $187 million, or $3.57 per share, up from $158 million, or $2.97 per share, a year earlier. Sales grew 9% year-over-year to $1.58 billion, up from $1.45 billion.
In January, Abercrombie provided an early look at its holiday performance, raising its fourth-quarter outlook. However, its stock declined that day as the forecast indicated moderating growth and no anticipated improvement in operating margin beyond prior projections. After nearly two years of rapid stock and sales growth, Abercrombie’s business appears to be stabilizing. Investors may now be shifting focus to companies with more immediate growth potential.
While Abercrombie continues to expand and develop its international market presence, it remains uncertain whether the blockbuster results achieved during its turnaround under CEO Fran Horowitz will persist. The company faces challenging year-over-year comparisons, and some momentum from its transformation may be waning. Additionally, consumer spending has been cautious since the start of the year, pressuring specialty retailers that sell discretionary items like clothing. Factors such as geopolitical tensions, unseasonably cool weather, and mass tragedies like the Los Angeles wildfires have dampened demand. Rising prices due to tariffs have also weighed on consumer confidence, which fell to its lowest level since 2021 in February.
Abercrombie may have also been impacted by the proposed TikTok ban, which affected E.l.f. Beauty’s performance earlier in the year. Both companies rely heavily on TikTok for marketing. In February, E.l.f. CEO Tarang Amin noted that the proposed ban likely impacted cosmetics sales as users reduced posts like “get ready with me” videos and clothing hauls, which typically drive sales.
In a January press release, CEO Fran Horowitz emphasized that Abercrombie will prioritize profit growth over sales to “drive long-term shareholder value.” She expressed confidence in the company’s brands and operating model, stating, “Following an expected two years of double-digit top and bottom-line growth, I am as confident as ever in the power of our brands and operating model as we move forward, supported by the outstanding capabilities we’ve built.” Horowitz added that in 2025, Abercrombie aims to achieve sustainable, profitable growth by executing strategies to attract and retain customers globally, leveraging its margin structure and balance sheet to grow operating income and earnings per share faster than sales.
— news from CNBC