An Abercrombie & Fitch store stands in midtown Manhattan in New York City on Oct. 24, 2024.
Spencer Platt | Getty Images
Abercrombie & Fitch‘s growth story is starting to slow down.
The apparel retailer issued weaker-than-expected guidance for its current quarter and fiscal 2025, and said it expects its sales will grow more slowly than Wall Street anticipated.
Abercrombie is expecting sales to rise between 3% and 5% in fiscal 2025, well below estimates of 6.8% growth, according to LSEG. During its current quarter, the company anticipates earnings per share will be between $1.25 and $1.45, short of expectations of $1.97.
Shares fell nearly 5% in premarket trading.
Beyond its guidance, Abercrombie narrowly beat Wall Street’s expectations in its fiscal fourth quarter. Here’s how the retailer performed compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:
- Earnings per share: $3.57 vs. $3.54 expected
- Revenue: $1.58 billion vs. $1.57 billion expected
The company’s reported net income for the three-month period that ended Feb. 1 was $187 million, or $3.57 per share, compared with $158 million, or $2.97 per share, a year earlier.
Sales rose to $1.58 billion, up 9% from $1.45 billion a year earlier.
In January, Abercrombie offered investors a glimpse into its holiday performance when it released an early set of results and raised its fourth-quarter outlook. Still, its stock tumbled that day because the forecast showed that Abercrombie was expecting its growth to moderate, and it didn’t anticipate its operating margin would improve beyond its previous forecast.
Following about two years of explosive stock and sales growth, Abercrombie’s business appears to be leveling out, and the markets may be turning away from retail’s biggest star in favor of names with more immediate upside.
The company is still growing, and working to build out its international market, but it’s unclear if it’s still going to see the blockbuster numbers it’s been putting out after implementing a turnaround under CEO Fran Horowitz. It faces tough prior-year comparisons, and some of the buzz from the turnaround might be starting to fade.
Plus, consumers have been noticeably cautious since the start of the year, which is always going to pressure specialty retailers that sell discretionary goods like clothes. Geopolitics, unseasonably cool weather and mass tragedies like the wildfires in Los Angeles have dampened consumer demand, but shoppers are also concerned about things like rising prices from tariffs. In February, consumer confidence slipped to its lowest levels since 2021.
Additionally, Abercrombie could have seen an impact from the proposed TikTok ban, which dragged on E.l.f. Beauty‘s performance at the start of the year. Both of the companies rely heavily on TikTok for marketing. In February, E.l.f. CEO Tarang Amin told CNBC that he suspects the proposed ban impacted cosmetics sales because people weren’t posting things like “get ready with me” videos or clothing hauls, which can drive sales.
In a news release in January, Horowitz signaled that moving forward, Abercrombie will be more focused on boosting profits than sales as it looks to “drive long-term shareholder value.”
“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,” said Horowitz. “In 2025, we will look to continue sustainable, profitable growth through the execution of our playbooks to win and retain customers around the world. Our goal is to leverage our healthy margin structure and balance sheet to grow operating income dollars and earnings per share at rates faster than sales.”
