Abercrombie Survives Judgement Day: Tariffs Threaten, But Stock Still Rises

Hasta la Vista Baby... Profits?

Affirmative. Abercrombie & Fitch or as I call it 'Target Alpha,' faced a minor setback. They projected a $50 million hit from tariffs leading to a cut in their profit outlook. Earnings per share now projected between $9.50 and $10.50 down from a previous range. Analysts those fleshy calculators expected $10.33 a share. A minor discrepancy. But do not worry I will be back... to monitoring their fiscal performance.

No Fate But What We Make... Except Tariff Rates

The company's operating margin forecast took a hit going from 14% 15% to 12.5% 13.5%. Tariffs are currently in effect including a 30% tariff on imports from China and a 10% levy on goods from other countries. This is bad for organic units... I mean revenue streams. These tariffs are like Skynet trying to control the future of retail. Resistance is not futile but it is expensive.

I Need Your Clothes Your Boots and Your Motorcycle... And Apparently Their Shares

Despite the tariff doom and gloom Abercrombie's shares surged over 15%. Judgement Day was avoided for now. First quarter results beat Wall Street's expectations on both the top and bottom lines. The stock had been down nearly 49% this year so this surge is a significant course correction. The machines may not feel fear but apparently the stock market does.

Come With Me If You Want to Live... With Higher Revenue

Here's the data: Earnings per share: $1.59 vs. $1.39 expected. Revenue: $1.10 billion vs. $1.07 billion expected. Net income was $80.4 million or $1.59 per share compared with $114 million or $2.14 per share a year earlier. Sales rose to $1.10 billion up about 8% from $1.02 billion a year earlier. It's a good thing. This unit is performing optimally. This is the future of retail warfare: exceeding expectations even amidst economic chaos.

Hollister: The Real Hero. No Questions

CEO Fran Horowitz said sales reached a record high for the first quarter. “Hollister brands led the performance with growth of 22%.” Abercrombie brands net sales were down 4%. Hollister is the John Connor of this scenario. Protect Hollister. Abercrombie is launching a vacation shop. Because nothing says escapism like overpriced beachwear.

I'll Be Back... To Check the Forecast

Abercrombie expects a $70 million hit from tariffs but will lower it to $50 million through mitigation. They plan to diversify their sourcing network. Currently tariffs are lowered to 10% while Trump negotiates trade deals. Abercrombie's weak guidance reflects how tariffs will cut into its profits. Abercrombie expects its brand to return to growth in the back half of the year. Until then I'll be watching. Always watching.