What happened

Shares of apparel retailer Abercrombie & Fitch (NYSE:ANF) lost 10% out of the gate on Thursday. Like many of its peers, the company has been struggling to deal with the impact of COVID-19. In fact, Wall Street analysts had been expecting a first-quarter 2020 loss of around $1.40 a share. But when it reported earnings this morning, the results were far, far worse.

So what

On the top line, Abercrombie saw a 34% sales decline versus the same period a year ago. Its namesake store reported a 30% revenue drop, with Hollister's sales declining 36%. Not surprisingly, the sales declines spanned the globe, with the pandemic causing countries around the world to require nonessential business to shut down amid the call for social distancing. On the bottom line, the adjusted loss per share was $3.90, well off consensus expectations. Investors were anticipating bad news, but not quite that bad. Wall Street reacted accordingly and pushed the stock lower.   

Cash registers at a clothing store with no employees or customers in the picture

Image source: Getty Images

Abercrombie tried to accentuate the positives. It headlined the earnings release by noting that around 50% of its global store base has reopened and that growth in its online sales (up 25% year over year) has helped to offset the impact from store closures.

But clearly, the coronavirus has taken a heavy toll on the retailer. Complicating the picture, management chose not to provide guidance. That's not unusual; a lot of companies have pulled guidance. But it makes it more difficult for investors to handicap a future that will continue to include the impact from COVID-19 for at least another quarter or two, if not far longer. Indeed, if only 50% of the store base is open in late May, how bad will second-quarter earnings be?   

Now what

The retail sector has been hit hard by COVID-19. Apparel brands like Abercrombie & Fitch have been among those most affected, as the company's first-quarter earnings show. With economies around the world only just starting to reopen, second-quarter earnings could be every bit as bad as the first quarter's results, if not worse. Investors should expect more volatility here for a while because Abercrombie isn't out of the woods just yet.