Citi Downgrades Abercrombie & Fitch and Urban Outfitters on Tariff Risks Ahead of Q2 Results

Citi downgrades Abercrombie & Fitch and Urban Outfitters, citing tariff risks into Q2 results. The firm's analyst, Paul Lejuez, expects the specialty retailer to beat second-quarter expectations, but notes tariff risks as a concern. Shares of Abercrombie & Fitch were trading lower following the downgrade.

In a recent development, Citigroup has downgraded shares of Abercrombie & Fitch (ANF) and Urban Outfitters (URBN) to "Neutral" from "Buy," citing potential tariff risks that could impact the specialty retailers' second-quarter earnings. The downgrade was announced by Paul Lejuez, Citigroup's analyst, who expects both companies to beat second-quarter expectations but acknowledges the risk of tariffs.

Lejuez stated that while the companies are expected to post strong earnings, the ongoing tariff issues pose a significant risk. Tariffs have been a persistent concern for retailers, particularly those that rely heavily on imported goods. The analyst noted that while Abercrombie & Fitch and Urban Outfitters have shown resilience in the face of tariffs, the uncertainty surrounding the trade environment could lead to higher costs and potential disruptions in supply chains.

Following the downgrade, shares of Abercrombie & Fitch were trading lower, reflecting the market's concern over the potential impact of tariffs. The company reported $1.59 EPS for the last quarter, exceeding estimates, with a net margin of 10.60% and revenue growth of 7.5% year-over-year [1]. Despite the strong performance, the company's reliance on imported materials and its global operations make it vulnerable to tariff-related headwinds.

Urban Outfitters, which also operates globally, faces similar challenges. The company has been expanding its international presence and relies on a diverse range of suppliers. The risk of tariffs could increase costs and potentially slow down growth, as noted by Lejuez.

The downgrade comes as Wall Street remains bullish on Walmart, which is set to report its fiscal second-quarter earnings on Thursday. Analysts expect Walmart to deliver quarterly earnings of 73 cents per share, marking an 8.96% jump relative to the same quarter in the prior year [2]. Walmart's strong performance is expected to continue, driven by its core U.S. business and expanding global operations, despite tariff-related headwinds.

References:
[1] https://www.marketbeat.com/instant-alerts/filing-swiss-national-bank-sells-2900-shares-of-abercrombie-fitch-company-nyseanf-2025-08-17/
[2] https://finance.yahoo.com/news/walmart-wmt-shares-near-time-141100475.html