Abercrombie & Fitch Tanks 13.1% on Weak Q4 Results

Abercrombie & Fitch (NYSE: ANF) shares were down 13.1% on March 2, after the retail giant reported weaker-than-expected Q4 results due to supply chain challenges faced during the holiday season, which were heightened by the Omicron variant.

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Q4 Numbers

Adjusted earnings of $1.14 per share fell way short of analysts’ expectations of $1.27 per share. Comparatively, the company reported earnings of $1.51 per share for the prior-year period.

Meanwhile, net sales jumped 4% year-over-year to $1.16 billion but fell short of consensus estimates of $1.18 billion. On top of that, gross margin declined 220 bps to 58.3%, mainly due to higher freight costs.

FY2022 Outlook

Looking ahead, management issued financial guidance for FY2021.

The company forecasts net sales are forecast to grow 2% to 4% year-over-year, with the U.S. continuing to outperform in Europe, the Middle East and Africa (EMEA) and Asia-Pacific (APAC) regions. Meanwhile, both comparable sales and store count will drive growth.

Disappointingly, gross margin is expected to decline 200 basis points year-over-year due to higher costs.

For the fiscal first quarter, net sales are forecast to grow in low-single-digits year-over-year, while gross margin is expected to decline 400 bps due to higher freight costs.

CEO Comments

Abercrombie & Fitch CEO, Fran Horowitz, commented, “Looking ahead, we will continue to thoughtfully manage the business to support long-term growth leveraging our multi-year investments in systems, processes and tools across digital, technology and data and analytics.”

The company will give out further details on its three-year plan at its Investor Day, scheduled to be held in June.

Analysts Recommendation

The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 3 Buys and 2 Holds. The average Abercrombie Fitch Stock price projection of $46.40 implies 48.9% upside potential to current levels.

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