Abercrombie Down More Than 17% on Revised View, Issues Business Update

Shares of Abercrombie & Fitch Co. ANF fell more than 17% yesterday despite issuing an encouraging business update. Investors’ sentiments were hurt by ANF’s updated forecasts for the fourth quarter and fiscal 2025 for certain metrics. The revised outlook includes the anticipated impact of tariffs on goods imported into the United States in accordance with trade policies as of Jan. 9, 2026. However, this does not include any other potential future trade policy changes imposed by the United States or other countries. Net of planned mitigation efforts, the full year outlook assumes nearly $90 million of tariff expense or 170 basis points as a percent of net sales.

For fiscal 2025, management now predicts net sales growth of at least 6% compared with the earlier forecast of a 6-7% rise. Operating margin is now projected to be around 13% compared with the 13-13.5% range guided earlier. Net income per share is currently envisioned to be in the band of $10.30-$10.40 compared with the previous guidance of $10.20-$10.50. It now anticipates capital expenditures of $245 million, up from $225 million expected earlier.

Effective tax rate is still projected around 30% for the fiscal year, while share repurchases are likely to be around $450 million and diluted weighted average shares will be about 48 million. For fiscal 2025, Abercrombie expects to deliver around 100 new physical experiences, comprised of 60 new stores and 40 remodels or right-sizes, while shutting down 20 stores. Fiscal 2025 view reflects $39 million net benefit on a pre-tax basis or $29 million on a tax-adjusted basis, from a litigation settlement.

For fourth-quarter, net sales are projected to grow around 5% compared with the band of 4-6% expected earlier. Net income per share is likely to come in the bracket of $3.50-$3.60 compared with the $3.40-$3.70 forecasted earlier. Operating margin is still likely to come around 14%. Effective tax rate is still projected around 30% for the final quarter, while share repurchases are likely to be around $100 million and diluted weighted average shares will be about 47 million.

What’s More for ANF?

Management highlighted that the company experienced record quarter-to-date net sales through December, aligned with its projections. The company saw balanced growth across its regions, brands and channels. While Hollister brand had a robust holiday season likely to deliver another year of mid-teens sales growth for fiscal 2025, it witnessed a robust customer response in namesake brand over the holidays, anticipating to grow sales in the low single digits for the fourth quarter.

ANF’s brands have been strong and are well poised to grow across their sizable addressable markets. Looking ahead, management intends to build on its healthy operating model to drive continued expansion within the owned-and-operated channels, while also advancing the latest go-to-market partnerships and capabilities to efficiently extend the global reach and connect with new customers worldwide. Hence, ANF is on track for another year of smooth progress, delivering on its commitments. It projects top-tier profitability this year, with solid operating margins alongside monitoring tariffs and expanding investments for long-term success.

In a nutshell, management is focused on creating a trend-right merchandise assortment, deepening relations with customers via marketing, enhancing the digital commerce agenda and efficiently controlling expenses. Such strengths might continue driving ANF’s results ahead. Over the past six months, shares of this Zacks Rank #3 (Hold) company have gained 11.6% compared with the industry’s 16.3% growth.

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