Dismal APAC Performance, Higher Freight Costs, FY22 Outlook Cut: Abercrombie & Fitch's Q1 Highlights

Abercrombie & Fitch Co ANF reported first-quarter FY22 sales growth of 4% year-on-year to $813 million, beating the consensus of $799.31 million.
Net sales from the Hollister brand decreased 3% Y/Y, and Abercrombie rose 13%.
Sales in the U.S. climbed 6% Y/Y, and EMEA rose 3%. APAC sales fell 35% impacted by COVID lockdowns in China.
Gross profit fell 9% Y/Y to $449.5 million. The gross margin was 55.3%, contracted by 810 basis points Y/Y.
The operating loss for the quarter was $(9.7) million versus an operating income of $57.4 million a year ago.
The company held $468 million in cash and equivalents as of April 30, 2022. Net cash used for operating activities totaled $(218) million.
Inventories of $563 million increased 45% Y/Y.
Adjusted EPS loss of $(0.27) missed the analyst consensus of $0.08.
Fran Horowitz, CEO, said, "Looking forward, we expect higher costs to remain a headwind through at least year-end. We expect freight relief in the fourth quarter as we anniversary increased air usage last year due to the Vietnam shutdown."
Outlook: Abercrombie sees FY22 net sales to be flat - up 2% down from the previous outlook of up 2% - 4%.
It expects Q2 net sales to be down low-single-digits.
Price Action: ANF shares are trading lower by 30.4% at $18.60 on the last check Tuesday.

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