Abercrombie Just Crashed 15%--Is This the Beginning of the End for Its Hot Streak?

GuruFocus.com
03-06

Abercrombie & Fitch (NYSE:ANF) just took a 15% dive at 10.51am today, as investors reacted to its softer-than-expected outlook for 2025. The apparel retailer, known for banking on trendy styles like wide-legged jeans, is now facing the reality of a cautious consumer. Despite a strong holiday season, retailers across the boardfrom Walmart (NYSE:WMT) to Home Depot (NYSE:HD)have been playing it safe with their forecasts. Abercrombie expects annual sales growth of 3% to 5%, missing Wall Street's 6.8% target, and sees operating margins landing between 14% and 15%, factoring in a $5 million tariff hit. While its Hollister brand surged 16% in Q4, the namesake label lost steam in February, raising questions about sustained demand.

    The company's Q4 numbers were solid, with $1.58 billion in revenue and earnings per share of $3.57, edging past expectations. But the real issue? Its 2025 guidance came in weak. First-quarter EPS is projected between $1.25 and $1.45well below the $1.96 analysts had penciled in. CEO Fran Horowitz remains optimistic about building on Abercrombie's recent momentum, but investors aren't buying itliterally. William Blair analyst Dylan Carden summed it up bluntly: "The initial print does not sow confidence." With consumer spending tightening, especially on discretionary apparel, Abercrombie faces an uphill battle to maintain its recent winning streak.

    In a move to reassure investors, Abercrombie's board approved a $1.3 billion stock buyback, planning to repurchase around $100 million in shares per quarter through 2025. While that might soften the blow, the real test will be whether the company can reignite demand and prove that this growth story isn't losing steam. With shares slipping to $83.16 in early trading, all eyes are on how Abercrombie navigates consumer shifts, tariff pressures, and the unpredictable retail landscape ahead.

    This article first appeared on GuruFocus.

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