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Inflation Affects Profits of Abercrombie & Fitch Co

Inflation Affects Profits of Abercrombie & Fitch Co

Abercrombie & Fitch Co recently announced its annual forecasts for sales and margins and posted a surprise quarterly loss due to a surge in freight and raw material costs.

The high inflation has pushed consumers to cut spending on discretionary goods such as apparel, while persistent supply chain issues, worsened by the war in Ukraine, have dented profits.

Abercrombie, which had airfreighted goods to push its products through a clogged supply chain for the key holiday season, was left with excess inventory in the quarter after the festive period.

To clear the stock, the company offered more discounts and clearance sales, which further crimped its margins in the quarter to 55.3% from 63.4% last year.

In contrast, high-end players including Ralph Lauren (RL.N) and French brand Chanel forecast upbeat 2022, as the companies cushion the impact of inflation through price increases.

A&F expects net sales to be flat to up 2% in fiscal 2022, compared with its earlier forecast of a 2% to 4% growth.

Analysts on average expect sales to increase 3.5% to $3.84 billion, according to Refinitiv IBES data.

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