Abercrombie and Fitch reports financial results Thursday, Aug. 29.Seth Wenig/The Associated Press
Abercrombie & Fitch Co cut its full-year sales forecast on Thursday after missing Wall Street estimates in the second quarter, as the apparel maker grapples with the impact of increased U.S. tariffs on Chinese goods.
Shares of the New Albany, Ohio-based company tumbled 9 per cent in trading before the bell, as the company also forecast a drop of 50 to 90 basis points in gross margin for the year, reversing its earlier expectations of a rise.
President Donald Trump last week announced additional tariffs on $550 billion worth of Chinese imports, including footwear and clothing.
Hundreds of retailers, footwear companies and business groups urged Trump to scrap the proposed tariffs, warning they would jack up consumer prices and trigger job losses.
Abercrombie said these tariffs were expected to have a “direct adverse impact” on cost of merchandise and gross profit of about $6 million for the fall season.
To cushion the blow, the teen apparel maker has been aiming to cut the amount of goods sourced from China to below 20 per cent in fiscal 2019 from 25 per cent a year earlier.
The company now expects full-year sales in the range of flat to up 2 per cent from a rise of 2 per cent to 4 per cent estimated previously.
Net sales slipped to $841.1 million from $842.4 million, below Wall Street expectations of $852.5 million for the second quarter ended Aug. 3.
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