Abercrombie Closes Stores Globally To Contain The Virus Spread

Abercrombie & Fitch Company (NYSE:ANF) , like other retail counterparts, revealed plans to close stores worldwide, as a preventive measure to slow the spread of the deadly coronavirus (COVID-19). The company stated that all its brands’ stores outside the APAC region will be temporarily closed. This will include the closing of all stores in North America from Mar 15 and EMEA from Mar 16 through Mar 28. However, the company will continue to operate its online stores in all regions.

Further, the Zacks Rank #3 (Hold) company has withdrawn the first-quarter and fiscal 2020 guidance that it provided on the fourth-quarter fiscal 2019 earnings call on Mar 4, as it is unable to predict the potential impacts of the virus outbreak on its business, including the timing of impacts as well as merchandise demand.

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On the last earnings call, Abercrombie had estimated flat to 2% rise in sales for fiscal 2020, indicating $60-$80 million estimated adverse impacts of the COVID-19 outbreak and about $10 million of unfavorable impacts of changes in foreign currency exchange rates. It projected comps to be down in low-single digits, with the adverse impact of 200 bps from the coronavirus outbreak. For first-quarter fiscal 2020, it anticipated sales decline in mid-single digits, including an adverse impact of $5 million from negative currency translations and $40-$50 million from the coronavirus outbreak. Meanwhile, comps were expected to be down in mid-single digits, with 600 bps of estimated adverse impacts from the virus outbreak.

Driven by the COVID-19 outbreak, stocks of most retailers have been jittery lately. Shares of Abercrombie have lost 24.8% year to date compared with the industry’s decline of 39.5%.

The announcement came in response to President Donald Trump’s declaration of a national emergency on Mar 13 to prevent further spread of coronavirus.

The declaration frees up to $50 billion of dollars in federal funds for emergency relief operations. It also eases regulations on the provision of healthcare and could speed up testing. The President also urged every state to set up emergency operation centers, effective immediately, and every hospital in the country to activate its emergency plan. Several US states have taken measures to reduce the infection rate, which include banning large gatherings, sporting events and closing schools.

Later on, the Federal Reserve lowered its benchmark interest rates to nearly zero on Mar 15 and launched a massive $700-billion quantitative easing program to shield the economy from the effects of the virus outbreak. The new fed funds rate is expected to be 0-0.25% now, down from 1-1.25% mentioned earlier. The quantitative easing program will include the purchase of $500 billion worth of Treasurys and $200 billion of agency-backed mortgage securities.

Along with Abercrombie many companies closed stores in the United States and other countries to contain the spread of coronavirus. Yoga apparel maker, lululemon (NASDAQ:LULU) , announced the closure of all stores in North America and Europe from Mar 16 through Mar 27, while keeping its online site active.

Also, NIKE (NYSE:NKE) is likely to temporarily close all its company-owned stores in multiple countries around the world, including in the United States, Canada, Western Europe, Australia and New Zealand, from Mar 16 to Mar 27.

Moreover, Under Armour (NYSE:UAA) has closed all stores in North America between Mar 16 and Mar 28, 2020, safeguarding the health of its employees and customers.

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