Abercrombie sales fall short of expectations due to supply chain disruptions

By

Robin Driver

Published
Aug 27, 2021

American fashion retailer Abercrombie & Fitch Co. reported Q2 sales of $865 million on Thursday, disappointing analysts as extended manufacturing facility closures continue to take their toll on the company’s top line.

The New Albany, Ohio-based company’s sales for the second quarter ended July 31, 2021, represented a 24% increase compared to the $698 million reported by the retailer in the prior-year period, when its operations were negatively affected by temporary store closures related to the Covid-19 pandemic. When compared to the same period two years ago – prior to the health crisis – sales fell 3%.
 
According to Refinitiv data cited by CNBC, financial analysts had been expecting Abercrombie to report quarterly revenues of $879 million.

As discussed by Abercrombie CFO Scott Lipesky in an earnings conference call on Thursday, the company’s disappointing sales reflected shipping delays and inventory constraints caused by the temporary closure of overseas manufacturing facilities, particularly in southern Vietnam. The company hopes that this situation will be resolved by, at the latest, the start of the fourth quarter.
 
The retailer’s digital net sales in Q2 totaled $376 million, decreasing 3% as compared to the prior-year period and increasing 52% as compared to the pre-pandemic levels reported by Abercrombie in the second quarter of 2019.
 
Broken down by brand, the company’s namesake Abercrombie business posted sales of $350 million in the quarter, up 30% year over year, while the Hollister brand achieved revenue of $514 million, a 20% rise compared to Q2 2020.
 
In the U.S., the retailer’s sales rose 31% year over year, totaling $602 million. Overall international revenue for the quarter rose 10% to $263 million, including a 1% decline in Asia-Pacific, where sales were $41 million, and an 11% rise in the EMEA (Europe, Middle East and Africa) region, which accounted for $191 million in sales.
 
Abercrombie’s quarterly net income was $109 million, or $1.69 per diluted share, as compared to net income of $5 million, or $0.09 per diluted share, in the prior-year period.
 
In a release, Abercrombie CEO Fran Horowitz said that the company had seen “a strong start to the U.S. back-to-school season” and highlighted the positive response to the relaunch of the group’s Gilly Hicks brand.
 
In the first six months of the year, Abercrombie’s net sales totaled $1.6 billion, up 39% from $1.2 billion in the same period in the previous year. Net income for the first half of the fiscal year was $150 million, or $2.32 per diluted share, compared to a loss of $239 million, or $3.82 per diluted share, in the first six months of 2020.
 
Abercrombie currently operates 730 stores under its various banners, boasting locations in North America, Europe, Asia and the Middle East.
 
Following the announcement of its disappointing quarterly sales, Abercrombie & Fitch shares fell 10%.