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Abercrombie shares tumble as provide chain constraints, delayed back-to-school purchases damage gross sales

The Abercrombie & Fitch retailer at South Park mall in Charlotte, North Carolina.

Chris Keane | Reuters

Abercrombie & Fitch shares tumbled round 10% on Thursday after the attire retailer reported disappointing gross sales as extra teenagers are delaying back-to-school clothes purchases.

The corporate, which additionally owns Hollister, cautioned it continues to expertise delivery delays and stock constraints on account of manufacturing services being quickly shutdown abroad. And within the brief time period, that may weigh on outcomes.

“Proper now, it is powerful on the market. All of the articles you learn are actual,” Chief Monetary Officer Scott Lipesky advised analysts on an earnings convention name. “And people of us on this aspect of the fence reside via it day-after-day.”

Abercrombie is managing via cargo delays of 1 to 3 weeks, on common, by pulling ahead deliveries as a lot as doable and leveraging air freight the place obligatory, Lipesky mentioned. Nonetheless, he expects these steps will result in increased prices within the again half of the 12 months.

Extended manufacturing unit shutdowns

The retailer is hoping that manufacturing services in southern Vietnam, which have been on prolonged closure because of the Covid pandemic, will open by subsequent month or by early within the fourth quarter.

“Nevertheless it’s out of our management at this level,” Lipesky mentioned.

For the fiscal second quarter, internet revenue rose to $108.5 million, or $1.69 per share, from $5.46 million, or 9 cents a share, a 12 months earlier. Excluding one-time objects, Abercrombie earned $1.70 per share, topping estimates for 77 cents, based mostly on a survey of analysts by Refinitiv.

Internet gross sales grew 24% to $864.9 million from $698.Three million a 12 months earlier. That was in need of expectations for $879 million.

The corporate mentioned gross sales at its Hollister, Gilly Hicks and Social Vacationer manufacturers rose 20% 12 months over 12 months, whereas they had been up 30% at Abercrombie.

In contrast with 2019 and pre-pandemic ranges, the corporate mentioned its income for the three-month interval ended July 31 was up about 3%. In the US, Abercrombie’s largest market, internet gross sales grew 31% on a one-year and 11% on a two-year foundation.

For its fiscal third quarter, Abercrombie is now calling for internet gross sales to be up 2% to 4% from 2019 ranges of roughly $863 million.

Internet gross sales in fiscal 2021 are forecast to be up low to mid single digits from the $3.6 billion Abercrombie achieved in 2019.

Gradual-moving back-to-school season

Chief Govt Fran Horowitz advised CNBC in a telephone interview that, up to now, the retailer is seeing a slow-moving back-to-school season, with many shoppers nonetheless holding off on main clothes hauls.

In previous seasons, she mentioned, the retailer has tracked a spending sample of “peaks and valleys,” with gross sales surging earlier than a drop-off within the fall. However this 12 months, extra teenagers seem like readjusting to socializing and spending time on trip earlier than heading again to the mall.

“It is an elongated season,” Horowitz mentioned. “At this time limit, [consumers] are nonetheless shopping for shorts and tees and even swim, though they don’t seem to be carrying that again to highschool.”

“The mindset will shift within the subsequent couple of weeks … as we move via Labor Day weekend and the New York space heads again to highschool for the primary time in two years,” she mentioned.

Regardless of Thursday’s sell-off, Abercrombie shares are up greater than 70% 12 months thus far, bringing its market cap to $2.1 billion.

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