Abercrombie forecasts muted holiday quarter as COVID-19 cases rise

(Reuters) -Abercrombie & Fitch Co gave a tepid forecast for the crucial holiday quarter on Tuesday, as a resurgence in COVID-19 cases could dampen consumer appetite to shop ahead of the busy season.

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 of the apparel retailer reversed course to trade down about 2% after touching their highest in over a year as the company handily beat expectations for third quarter results.

“With COVID numbers rising, there is the potential for a change in apparel demand and customer willingness to enter physical stores. Also, there is a looming possibility of renewed store restrictions and closures.” Chief Financial Officer Scott Lipesky said on a post-earnings call with analysts.

A surge in cases has already spurred Britain and other countries in Europe, as well as many American states, to go into another lockdown.

Abercrombie now forecasts holiday quarter sales to be down between 5% and 10%, in line with analysts’ expectations of a decline of 7.35% to $1.097 billion.

The company also anticipates markdown pressures as it exits from seven of its flagship locations in a move to reduce its dependence on demand from tourists that has taken a hit due to the pandemic.

Apparel retailers have been ramping up investments in their online business to combat declining store traffic as customers shift to online shopping due to the pandemic, tapping popular social media influencers and adding options such as curbside pickups.

Abercrombie’s digital sales, which jumped 43% in the third quarter, were also boosted by demand for its Gilly Hicks brand’s activewear and loungewear as customers staying at home turn to comfortable clothing.

Excluding one-time items, the company reported a profit of 76 cents per share in the quarter ended Oct. 31, compared with expectations of break-even, according to IBES data from Refinitiv.

Net sales fell 5% to $819.7 million, but beat estimates of $739.36 million.

Reporting by Aditi Sebastian; Editing by Shailesh Kuber