Abercrombie & Fitch trims forecast as Hollister, international business drag

(Reuters) - Teen apparel retailer Abercrombie & Fitch Co ANF.N trimmed its annual sales growth forecast on Tuesday, blaming political issues ranging from Brexit to Hong Kong protests for keeping customers away from its stores outside the United States.

FILE PHOTO: Signage is seen at the Abercrombie & Fitch store on Fifth Avenue in Manhattan, New York City, U.S., February 27, 2017. REUTERS/Andrew Kelly

Shares fell as much as 8% after the company also reported its first same-store sales drop in at least eight quarters at Hollister, a brand that has powered much of the retailer’s growth.

Abercrombie joins a growing list of American retailers that have called out months of pro-democracy protests in Hong Kong for causing store closures and hurting revenue from the Asian shopping hub.

The company, which earns about 32% of its revenue from international markets, also said on a conference call that protests in Spain and France, as well as uncertainty around how Britain leaves the European Union, dampened demand in Europe.

The Ohio-based company said it now expects net sales to be in the range of flat to up 1% for the full year, compared with a previous range of flat to up 2%.

Abercrombie has in the past relied on Hollister to generate the bulk of its revenue with its denim and Gilly Hicks lingerie collections, but the surfwear-themed brand is no longer attracting as much demand from younger customers.

“Their fashion was a little bit off course for their customer” said Gabriella Santaniello, founder of retail research firm A-Line Partners.

“Hollister was sort of their golden child ... (so) the reversal in the sales trends there is a bit concerning.”

Same-store sales at Hollister dropped 2% in the quarter, while analysts on average had estimated a 0.20% rise, according to IBES data from Refinitiv.

Sluggish demand for Hollister offset a 3% rise in comparable stores sales at Abercrombie unit, while international comparable sales fell 8%.

The company also said U.S. tariffs on Chinese imports are expected to impact merchandise cost and gross profit by about $4 million in the fourth quarter and about $5 million in the full year.

The teen apparel maker said the current forecast assumes 16% of goods will be made in China, down from about 25% in fiscal 2018.

Net income attributable to the company fell to $6.5 million from $23.9 million a year earlier.

Excluding items, the company earned 23 cents per share, narrowly missing analysts’ estimate of 24 cents.

Net sales rose marginally to $863.5 million, but also missed Wall Street estimates.

Reporting by Aditi Sebastian; Editing by Sriraj Kalluvila and Anil D’Silva