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Even retail's biggest comeback story isn't safe from economic worries
By Grace Eliza Goodwin,
9 hours ago
Abercrombie & Fitch reported earnings that beat expectations on Wednesday, but its growth may be slowing.
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Abercrombie & Fitch CEO suggested it may face a tumultuous future.
The retailer reported positive earnings on Wednesday, but its stock was still falling.
The clothing retailer has resurrected itself in recent years, but its growth may be starting to slow.
Abercrombie & Fitch has had a major Wall Street resurrection , but even this comeback kid isn't immune from fears of a slowing economy.
The mall retailer reported better-than-expected second-quarter earnings on Wednesday and even raised its full-year outlook, but its stock still fell about 15% in early trading. It continued falling throughout the morning and afternoon on Wednesday.
Abercrombie reported that its sales rose 21% year over year, with its same-store sales rising 18%.
And within those sales, the profit margins increased almost 6 points, up to 15.5%, leading to a doubling of profits per share. On top of that, the company upped its full-year sales guidance from a predicted 10% growth to 12 to 13% growth.
And for the current quarter, the company said it expects sales to rise higher than what analysts had expected, according to CNBC .
But, that's still not quite enough growth for Wall Street. Because the retailer has seen such exponential growth in recent years, the market had expected an even better outlook for the company's future, but the reality is that its growth is actually slowing down.
And in Wednesday's earnings report, CEO Fran Horowitz warned of an uncertain future — something she hasn't mentioned in the last four quarters.
"We delivered a strong first half of the year, and we are increasing our full-year outlook," Horowitz said in the earnings report.
But, she hinted at the possibility of a tumultuous future, saying, "Although we continue to operate in an increasingly uncertain environment, we remain steadfast in executing our global playbook and maintaining discipline over inventory and expenses."
That was enough to spook investors.
The last time Horowitz made a similar suggestion was back in August 2023 during the company's Q2 2023 report , when she gave the caveat that "the macro environment remains dynamic."
"Investors might be a little bit scared that this could be peak growth for them," CFRA analyst Zachary Warring, who calls Abercrombie "the best-performing apparel brand in the US right now," told Yahoo Finance's Morning Brief .
But under the leadership of Horowitz, who joined in 2017, the brand has risen from the grave.
Millennials began returning to the brand after it revamped its style and modernized its stores, and even Gen Zs latched on to the new look. The company's stock was trading at just $32 just over a year ago, but by June of this year, it had skyrocketed to over $180 a share.
Horowitz has said that if a company is good enough, it can survive in any economic environment. But now, investors appear to be worried that Abercrombie's rally is losing steam.
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