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Demand for discretionary goods has taken a hit as consumers prioritize spending on essentials such as food and gas whose prices have been surging due to supply chain snarls and the Russia-Ukraine war.
Abercrombie joined some of the top U.S. retailers in flagging a hit to margins from decades-high inflation, with Walmart (NYSE:WMT) Inc and department store chain Kohl’s Corp (NYSE:KSS) trimming their profit targets last week.
“We expect higher costs to remain a headwind through at least year-end,” Abercrombie Chief Executive Officer Fran Horowitz said.
The company now expects net sales to be flat to up 2% in fiscal 2022, compared with its earlier forecast of a 2% to 4% growth. Analysts on average expect sales to increase 3.5% to $3.84 billion, according to Refinitiv IBES data.
It expects full-year operating margin between 5% and 6%, down from its previous outlook of 7% to 8%, reflecting a 200-basis-point hit from higher freight and raw material costs and lower sales.
