© Reuters. FILE PHOTO: Abercrombie & Fitch signage is seen at their store at the Woodbury Common Premium Outlets in Central Valley, New York, U.S., February 15, 2022. REUTERS/Andrew Kelly
(Reuters) -Abercrombie & Fitch Co trimmed its full-year sales forecast on Tuesday as record-high inflation hits demand for the retailer’s jeans, tops and dresses, sending its shares down 18% in premarket trade.
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:) Inc and department store chain Kohl’s Corp (NYSE:) 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.
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