Abercrombie & Fitch expects tepid sales growth, margins as tariffs loom

(Reuters) -Abercrombie & Fitch forecast downbeat annual sales growth and margins as retailers brace for weak consumer spending and the impact of U.S. tariffs, sending its shares down about 6% premarket on Wednesday.

Retailers from Walmart (NYSE:WMT) to Home Depot (NYSE:HD) have set their annual targets with caution despite enjoying a strong holiday season driven by discounts and promotions.

Abercrombie expects annual net sales growth of 3% to 5%, compared with market expectations for a 6.77% rise, according to data compiled by LSEG.

Sticky inflation and uncertainty around the impact of U.S. President Donald Trump’s tariffs are also keeping consumers cautious about spending on pricey apparel and other non-essentials.

The company expects fiscal 2025 operating margin of 14% to 15%, including the impact of tariffs announced in February on goods imported from China, Mexico, and Canada into the U.S.

Its operating margin was 15% for the year ended February 1.

Abercrombie imports about 5% to 6% of its goods from China and exposure to Mexico is "immaterial", company executives had said on a post-earnings call in November.

For the holiday quarter, the company reported net sales of $1.58 billion, edging past market expectations thanks to a 16% rise in sales at its teen-focused Hollister brand.

Abercrombie’s adjusted profit per share of $3.57 beat estimates of $3.54 for the fourth quarter. Its annual target of $10.40 to $11.40 was slightly above estimates.

The Ohio-based company also announced a new $1.3 billion stock buyback program.

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