Shares of Abercrombie & Fitch experienced a significant drop during intraday trading on Wednesday following the retailer's guidance indicating a slowdown in sales growth for fiscal year 2025. The brand anticipates that sales will rise only between 3% and 5%, a stark contrast to the 16% annual growth rate reported for the recently concluded fiscal year. Chief Financial Officer Robert Ball informed analysts during a conference call about the company's cautious outlook, which takes into account the US tariffs currently imposed on China, Canada, and Mexico.
Ball stated that they expect the tariffs will negatively impact their financials by approximately $5 million in 2025. As a reaction to this news, Abercrombie's stock fell nearly 12% by midday. In the context of rising international tensions, it is crucial to note that President Donald Trump's recently instituted 25% tariffs on imports from Canada and Mexico became effective on Tuesday, while the US government has also doubled its levies on Chinese imports.
In retaliation, Canada and China have announced their own countermeasures, further complicating the retail landscape. Earnings per share for Abercrombie in 2025 are projected to range between $10.40 and $11.40, falling short of Wall Street's expectation of $11.30. For the ongoing quarter, the outlook suggests an EPS range of $1.25 to $1.45, well below the Street's prediction of $1.89.
The company expects a sales growth of 4% to 6% in the first quarter. Looking backward, Abercrombie reported a 9% increase in fourth-quarter sales amounting to $1.58 billion, surpassing analysts’ estimates of $1.57 billion. Its adjusted EPS also made a remarkable jump to $3.57 from $2.97, outpacing the analyst expectation of $3.54. When analyzing comparable sales for the three-month period ended February 1, the company recorded a growth of 14%.
In terms of regional performance, net sales grew 11% in the Americas but saw a modest 2% rise in Europe, the Middle East, and Africa. However, there was a disappointing decline of 4% in the Asia-Pacific region. Analyzing brand performance, Hollister reported a robust 16% increase while Abercrombie itself managed only a 2% gain. Ball mentioned, "Across the business, we observed low single-digit growth in average unit retail performance and mid-single-digit unit growth driven by increased traffic, though this was net of the impact of the 53rd week." In light of the current financial climate, the company's board has sanctioned a new stock repurchase plan worth $1.3 billion, replacing its previous authorization from 2021..