Abercrombie & Fitch products can be seen at the Woodbury Common Premium Outlets store in Central Valley, New York, USA on February 15, 2022. REUTERS/Andrew Kelly/File Photo

Aug 25 (Reuters) – Abercrombie & Fitch on Thursday cut its full-year sales and margin forecasts after reporting an unexpected quarterly loss.

The Ohio-based retailer’s shares fell about 5% in morning trading.

With soaring inflation eroding consumer purchasing power at a faster pace than seen in decades, Americans are curbing spending on apparel, especially the styles favored during the pandemic, and buying essentials. It is given priority.

Abercrombie said it will revamp its inventory by removing casual and athleisure apparel that has fallen out of fashion and incorporating more dressy styles for the all-important holiday season.

Sales of the company’s California casual Hollister brand, which accounts for more than 50% of its business, were down 15% in the second quarter, while sales of its more upscale namesake Abercrombie label were up 5%.

“[Abercrombie’s]second-quarter earnings were disappointed by Hollister’s weakness,” said Dana Telsey, an analyst at Telsey Advisory Group.

“The shift from core basics to more fashion-driven products also contributed to the brand’s below-plan performance,” Telsey added.

Abercrombie CEO Fran Horowitz said a drop in demand for Hollister clothing was exacerbated as the critical back-to-school shopping season began, prompting the company to cut deep discounts to clear excess inventory of casual wear. He added that it should be provided.

The company joins some of the top U.S. retailers, including department store chains Macy’s and Nordstrom (JWN.N), in warning that profits will be squeezed by the need for more discounts.read more

Abercrombie now expects net sales to decline mid-single digits in fiscal 2022.

It also forecasts full-year operating margin in the range of 1% to 3%, below its previous estimate of 5% to 6%.

Reported by Mehr Bedi, Bangalore. Edited by Shailesh Kuber

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