By Senad Karaahmetovic

Shares of Abercrombie & Fitch (NYSE:)  are down 26% today after the company posted an unexpected Q1 loss.

ANF reported an adjusted loss of 27c per share, as compared to the EPS for the previous year of 67c. ANF was below the consensus estimates of an EPS value of 6.4c. The net sales reached $812.8 millions, an increase of 4% YoY. This was higher than the analyst consensus estimate at $793.9million. The analyst consensus was 59.4%. However, the gross margin was at 55.3%.

Abercrombie predicts that FY 2023 will see net sales growth of between 0% and 2%. This is down from the previous forecast of 2%-4%. According to the company, higher cost-related headwinds will continue at least through 2022 and it anticipates that Q2 net sales will be low single digits.

ANF anticipates a FY operating margin of between 5% and 6%. This is down from the previous forecast of 7%-8%. The Q2 operating profit is likely to be in the range of 3 to 4 percent, with YoY losses due to the increase in raw material and freight costs.

Due to 300bps of foreign currency lockdowns and China lockdowns, Q2 net sales will be lower than Q1 2021’s level of $865m.

“We expect freight relief in the fourth quarter as we anniversary increased air usage last year due to the Vietnam shutdown,” ANF said.

Paul Lejuez, Citi analyst, maintained a neutral rating and set a $30.00 price target for the share.

“We expect shares to face significant downward pressure today given the reduced guidance outlook,” the analyst said in a client note