Abercrombie & Fitch Co. plunged after trimming its sales outlook and flagging the impact of tariff on Chinese goods on its profit margin.

• Same-store sales, a key metric for retailers, were flat for its Abercrombie and Hollister Brand. The retailer now sees net sales being flat to up 2 per cent for the full year -- down from a previous range of 2 per cent to 4 per cent. The stock fell as much as 17 per cent to US$14.18 in New York, the biggest slide since its last earnings report.

Key Insights

- UBS analyst Jay Sole wrote earlier this month that the bar for apparel retailers is “essentially unreachable” this quarter due to the “major risk” of tariffs. With U.S. duties on Chinese goods poised to rise, Abercrombie said the latest round of tariffs are “expected to have a direct adverse impact on cost of merchandise and gross profit of approximately US$6 million for the fall season.”

- The retailer’s revised outlook includes factors in anticipated additional tariffs and of as much as 30 per cent, in addition to currency fluctuations.

- The quarterly result exacerbates the pressure on Abercrombie. It had rebounded in recent quarters, largely on the strength of its Hollister brand, but that momentum seems to have faded.

- The company said that apparel was hit by discounting earlier this summer as companies sought to draw in back-to-school shoppers earlier than usual. Even so, the company said its back-to-school performance has been “solid.”

Market Reaction

- The drop in Abercrombie’s shares to as low as US$14.18 was the lowest intraday level since 2017. The stock had declined 15 per cent this year through Wednesday’s close, part of a broad decline by apparel retailers.

- The retailer’s revised outlook includes factors in anticipated additional tariffs and of as much as 30 per cent, in addition to currency fluctuations.

- The quarterly result exacerbates the pressure on Abercrombie. It had rebounded in recent quarters, largely on the strength of its Hollister brand, but that momentum seems to have faded.

- The company said that apparel was hit by discounting earlier this summer as companies sought to draw in back-to-school shoppers earlier than usual. Even so, the company said its back-to-school performance has been “solid.”