Abercrombie & Fitch expects lower margins in 2022 as the clothing retailer struggles with supply issues and increased costs, despite a good recovery last year.
First expansion in years
After years of difficulties and numbers in the red, Abercrombie & Fitch seems to be recovering slowly. The fashion group, which used to be known for half-naked men and playing loud music in-store, has returned to pre-Covid levels. In 2021, the retailer achieved sales of 3.7 billion dollars (3.3 billion euros), 19 % more than a year earlier. Compared to the pre-Covid year 2019, sales were 2 % higher.
For the first time since 2008, the American company is therefore venturing into opening more stores this year than it is closing, WWD notes. Fifty store openings are on the agenda for 2022, compared to thirty store closures. CEO Fran Horowitz wants a more diversified retail base, including smaller branches and more stores outside of shopping centres. A&F also made a profit again: the gross result amounted to 343 million dollars (310 million euros).
Bearing the brunt of stock issues
Nevertheless, last year did not end gloriously for Abercrombie & Fitch. The retailer was hit hard by global supply issues in the fourth quarter, and it does not look like those problems will vanish any time soon.
During the crucial fourth quarter, net sales rose from 1.12 billion dollars to 1.16 billion (1.05 billion euros), while analysts expected 1.18 billion dollars, Reuters reports. According to the brand, the problem lay mainly with delivery shortages. The Omicron-variant also caused many factories in Vietnam to close and shipments to be delayed. These issues led to stock shortages during the end-of-year period when demand peaked. The retailer offered fewer and smaller discounts to safeguard margins, but this could not compensate for the rising shipping costs.
As soon as deliveries picked up and Covid levels began to drop, sales did indeed increase again. Abercrombie & Fitch is cautiously optimistic about 2022 and is expecting a modest turnover growth of 2 to 4 %. However, CEO Horowitz fears that margins will continue to shrink.
