Abercrombie cuts full-year sales and margin forecast on inflation hit

© Reuters. FILE PHOTO: Abercrombie & Fitch products are seen at their store at the Woodbury Common Premium Outlets in Central Valley, New York, U.S., February 15, 2022. REUTERS/Andrew Kelly/File Photo

(Reuters) -Apparel retailer Abercrombie & Fitch Co on Thursday cut its full-year sales and margin forecasts after reporting a surprise quarterly loss, underscoring increasing competition for consumer dollars amid surging inflation.

Shares of the Ohio-based retailer, which have shed more than 46% this year, were down about 13% in premarket trading.

Soaring inflation is eroding consumer spending power at a greater pace than seen in decades, prompting Americans to curb spending on apparel and other discretionary purchases and prioritize essentials.

The company, largely reliant on younger customers, becomes the latest retailer to find itself with a surplus of casual clothes and athleisure wear this summer as social events made a comeback and shoppers switch to dressier styles.

Abercrombie echoed sentiments from several top U.S. retailers, including department store chains Macy's (NYSE:M) and Nordstrom (NYSE:JWN), in warning that it will need to offer steep markdowns and clearance sales to get rid of excess inventories.

"We expect macro headwinds to persist and have taken action to adjust receipts across brands to fuel winning categories for late fall and holiday... We have right-sized the Hollister inventory receipt plan for holiday and beyond," Chief Executive Officer Fran Horowitz said.

Sales at Abercrombie's California casual Hollister brand, which also includes its Gilly Hicks and Social Tourist labels, fell 15% in the quarter, while its more upmarket eponymous Abercrombie label posted a 5% increase in sales.

The company now expects net sales to decline mid single digits in fiscal 2022, compared with its earlier forecast of flat to 2% growth.

Abercrombie now expects full-year operating margin in the range of 1 to 3%, lower than previously estimated at 5 to 6%.

Excluding items, teen- and millennial-focused retailer reported a loss of 30 cents per share, versus estimates of a profit of 22 cents.