(Reuters) -Abercrombie & Fitch raised its annual sales forecast on Wednesday, betting on robust demand for its Hollister brand of dresses and jeans as shoppers prioritize spending on trendy apparel undeterred by price hikes.
The company, whose denim jeans sell at an average $100, has been able to drive growth at its eponymous and Hollister brands by targeting affluent female shoppers, who make up a majority of the company's customer base.
Well-heeled shoppers in the U.S. have so far shown willingness
to soak up price hikes, as indicated by resilient spending on aspirational goods such as Birkenstock sandals and Bugaboo strollers.
However, Abercrombie expects to face some margin pain from U.S. President Donald Trump's trade policies, similar to other retailers such as Ralph Lauren and Coach handbag owner Tapestry.
Tariff-related costs will be about $90 million after mitigation, taking into account current level of levies, it warned on Wednesday. That is higher than a $50 million hit it had anticipated in May.
Most of Abercrombie & Fitch's key sourcing countries include Vietnam, Indonesia, and Cambodia, which are subject to tariffs in the range of 10% to 20%, while India faces potential tariffs of about 50%.
The company now expects net sales for fiscal year 2025 to grow in the range of 5% to 7%, compared to its prior forecast of a 3% to 6% increase.
Net income per share for the fiscal year 2025 is projected in the range of $10 to $10.50, compared with its earlier forecast between $9.50 and $10.50.
The apparel retailer posted net sales of $1.21 billion for the quarter ended August 2, slightly above analysts' average estimate of $1.20 billion, according to data compiled by LSEG.
Its quarterly adjusted profit of $2.32 per share beat estimates of $2.30 a share.
Shares of the company were down 3% in volatile premarket trading.
(Reporting by Savyata Mishra in Bengaluru; Editing by Leroy Leo)
