Abercrombie Tumbles as Holidays Fail to Deliver for Mall Stores

Abercrombie & Fitch Co. shares sank after holiday sales disappointed investors, helping spark a selloff in retail stocks.

The New Albany, Ohio-based company didn’t raise its outlook and now expects fourth-quarter sales growth of around 5%, the mid-point of its prior range.

The update came ahead of the ICR Conference taking place this week in Orlando. Other mall-based retailers, including American Eagle Outfitters Inc. and Urban Outfitters Inc., also put out holiday results that underwhelmed Wall Street.

The performance of US retailers surprised to the upside for much of last year, with consumers continuing to spend despite rising costs and worries about the economy. But now that positive sentiment appears to be fading.

Stock Declines

Shares of Abercrombie had jumped 90% since the company reported strong third-quarter results in November. But they plummeted 18% on Monday. American Eagle and Urban Outfitters also sank.

Expectations were high after teen brands appeared to be the big winners on Black Friday as discerning shoppers focused on trends and value. Hollister drew young shoppers with campaigns like its collaboration with Taco Bell for Cyber Monday that tapped into Y2K retro style.

Abercrombie had raised the low end of its annual forecast two months ago, boosted by strong back-to-school demand. While the company said holiday sales were “strong” at both its Hollister and Abercrombie brands, Monday’s update suggests that growth is moderating after years of momentum.

The namesake brand, Abercrombie, was expected to benefit from “trend-right drops, lean inventories, higher price points and bold marketing,” Bloomberg Intelligence analyst Mary Ross Gilbert said in a November note.

Lululemon Athletica Inc. appeared to be a bright spot, with the retailer saying fourth-quarter sales would be at the higher end of its guidance. But the stock gave up premarket gains and was little changed.

The yogawear chain is under a lot of scrutiny with results weakening amid more competition. Its chief executive officer is also poised to step down amid pressure from Chip Wilson, Lululemon’s founder, and Elliott Investment Management.