The changing shopping habits of American consumers are prompting national retailers to reassess their future sales outlook, with Abercrombie & Fitch becoming the latest to express caution regarding its 2025 sales growth. The decline in U.S. consumer confidence in recent months, as observed by the Conference Board, has highlighted growing concerns over inflation and trade-related issues. A notable increase in mentions of tariffs and trade conflicts adds to the concern.
The recent introduction of new tariffs by President Donald Trump on the major trading partners of the United States, namely Mexico, Canada, and China, has triggered swift retaliatory measures globally, impacting financial markets significantly. The looming threat of escalated inflation due to these tariffs has added to the economic uncertainty faced by households and businesses alike. Among the changes, Trump increased tariffs on Mexican and Canadian imports to 25% while Canadian energy imports remained at a 10% tariff. Simultaneously, tariffs on Chinese goods were doubled to 20%.
During its recent quarterly report, Abercrombie & Fitch revealed more conservative sales growth projections for 2025, estimating growth between 3% and 5%, which is not only below Wall Street expectations but also significantly lesser than the 16% growth achieved the previous year. Consequently, Abercrombie & Fitch stock sank over 14% on Wednesday, continuing a decline of nearly 46% for the year.
Neil Saunders, managing director of GlobalData, remarked that the retail sector is entering a more challenging phase. Saunders acknowledged Abercrombie & Fitch’s outstanding performance in 2024, which sets a high bar for the following year, and he suggested a natural moderation of growth is reflected in the company’s outlook. Abercrombie & Fitch joins a list of retailers preparing for slower times, some of which did not witness any exceptional growth in 2024.
Companies like Target have reported declining sales and profits last year, expressing continued pressure from the tariffs imposed on Mexico, Canada, and China, apart from dealing with additional costs. Even prior to the intensified trade conflict, Target reported a downturn in profits and sales during the vital holiday season, signaling dwindling consumer enthusiasm.
Target CEO Brian Cornell cautioned that potential price hikes are imminent, particularly affecting imported goods such as Mexican produce, including avocados. The President of Mexico, Claudia Sheinbaum, warned of impending retaliatory tariffs on U.S. goods, although specific details remain forthcoming.
Despite declining to provide detailed price increase forecasts, Cornell acknowledged some product price hikes are likely. Amidst this climate, Target’s shares have decreased by nearly 15% this year. Other specialty retailers have experienced similar stock declines, with companies like Gap, American Eagle, Guess, and Zumiez facing drops of around 29%.
Walmart, another retailer that previously thrived in 2024, anticipates a potentially more challenging future. The company recently announced that its earnings for this year could fall short of Wall Street’s projections by as much as 27 cents per share. Walmart forecasts an annual sales rise between 3% and 4%, reaching approximately $667.57 billion to $674.05 billion, which differs significantly from Wall Street’s earlier estimation of $708 billion for 2025.
As the economic landscape becomes increasingly volatile, retailers navigate an array of challenges shaped by shifting consumer preferences, inflationary pressures, and uncertainties surrounding global trade relations. This scenario underscores the need for companies across the sector to adapt and strategize to remain resilient in the face of these evolving challenges.
