Abercrombie shares fall as sales disappoint and supply chain constraints affect retailers

Shares of Abercrombie & Fitch fell about 10% on Thursday after clothing retailer reported disappointing sales as more teens delay buying clothes back to school.

The company, which also owns Hollister, warned that it continues to experience shipping delays and inventory restrictions due to the temporary shutdown of overseas manufacturing facilities. And in the short term, this will affect the results.

“It’s hard right now. Every article you read is real,” Scott Lipesky, chief financial officer, told analysts at a conference call on profits. “And those of us on this side of the fence are experiencing it every day.”

Abercrombie is being handled by shipping delays of one to three weeks, on average, pushing shipments as far forward as possible and taking advantage of air transportation when needed, Lipesky said. However, he expects these steps to lead to higher costs in the middle of the previous year.

The retailer expects manufacturing facilities in southern Vietnam, which have been shut down by the Covid pandemic, to open next month or early in the fourth quarter.

“But it’s out of our control right now,” Lipesky said.

For the second fiscal quarter, net income rose to $ 108.5 million, or $ 1.69 per share, from $ 5.46 million, or 9 cents a share, a year earlier. Excluding spot items, Abercrombie earned $ 1.70 per share, beating estimates by 77 cents, according to a survey by analysts by Refinitiv.

Net sales grew 24%, to $ 864.9 million, from $ 698.3 million a year earlier. That was lower than expectations of $ 879 million.

The company said sales of its Hollister, Gilly Hicks and Social Tourist brands increased 20% year-over-year, while they increased 30% to Abercrombie.

Compared to pre-pandemic and 2019 levels, the company said its revenue for the three-month period ended July 31 increased by about 3%. In the United States, Abercrombie’s largest market, net sales grew 31% in one year and 11% in two years.

For its third fiscal quarter, Abercrombie now calls for net sales to increase from 2% to 4% from 2019 levels of approximately $ 863 million.

Net sales in fiscal 2021 are expected to be low or average, from Abercrombie’s $ 3.6 billion in 2019.

Executive President Fran Horowitz told CNBC in a telephone interview that, so far, the retailer is seeing a slow season of back to school, with many consumers still remaining in major clothing procedures.

In past seasons, he said, the retailer has followed a spending pattern of “peaks and valleys,” with an increase in sales before a decline in the fall. But this year, it looks like more teens are readjusting to socialize and spend vacation time before returning to the mall.

“It’s an extended season,” Horowitz said. “At this moment, [consumers] they still buy shorts and t-shirts and even swim, even though they don’t wear it to school. ”

“The mindset will change in the coming weeks … as we go through Labor Day weekend and the New York area we go back to school for the first time in two years,” he said.

Despite Thursday’s sell-off, Abercrombie’s shares have risen more than 70% to date, bringing its market capitalization to $ 2.1 billion.