By Savyata Mishra
(Reuters) -Abercrombie & Fitch on Wednesday tightened its annual profit forecast and warned of a $90 million hit to its margins from import tariffs, sending its shares down 2% in early trading.
The tariff warning overshadowed the Hollister parent’s upbeat annual sales forecast, driven by robust demand for its dresses and denim jeans as shoppers prioritize spending on trendy apparel undeterred by price hikes.
In May, Abercrombie had expected a $50 million charge for the year, factoring for its mitigation efforts. However, levies on its key sourcing countries such as Vietnam, Indonesia, and Cambodia have risen to a range of 10% to 20%, while India faces potential tariffs of about 50%.
U.S. President Donald Trump’s trade policies have also put margin pressure on other retailers such as Ralph Lauren and Coach handbag owner Tapestry.
Abercrombie would tightly control inventory levels to cushion the hit from tariff and support its growth plans, company executives said on a post-earnings conference call.
The company, whose denim jeans average $100, has driven growth at its eponymous and Hollister brands by targeting affluent female shoppers.
Well-heeled shoppers in the U.S. have so far shown little resistance to price hikes, as indicated by resilient spending on aspirational goods such as Birkenstock sandals and Bugaboo strollers.
The apparel retailer now expects net sales for fiscal year 2025 to grow in the range of 5% to 7%, compared to its prior forecast of a 3% to 6% increase.
Annual net income per share is projected in the range of $10 to $10.50, compared with its earlier forecast between $9.50 and $10.50.
Net sales were $1.21 billion for the quarter ended August 2, compared with analysts’ average estimate of $1.20 billion, according to data compiled by LSEG.
Its adjusted profit of $2.32 per share beat estimates of $2.30 a share.
(Reporting by Savyata Mishra in Bengaluru; Editing by Leroy Leo)
