Abercrombie & Fitch Stock Drops Following Tepid Forecast and Tariff Concerns

The retailer's 2025 outlook predicts slower sales growth and margin pressures tied to tariffs and higher freight costs.

Abercrombie & Fitch shares fell sharply, with a 16% drop on Wednesday, following a weaker-than-expected 2025 sales and margin forecast.
The company anticipates 3% to 5% net sales growth for FY25, below market expectations, and operating margins between 14% and 15%, impacted by new tariffs on goods from China, Mexico, and Canada.
Tariffs are expected to reduce operating margins by approximately $5 million, while higher freight costs and inventory adjustments will add further pressure in the first half of the year.
Despite challenges, Abercrombie & Fitch exceeded FY24 earnings expectations, driven by strong Hollister brand performance and a 16% rise in holiday quarter sales.
The retailer plans to open 100 new stores in FY25, continue its share repurchase program, and focus on supply chain flexibility to mitigate external pressures.