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Abercrombie & Fitch shares sank Wednesday morning after the company’s first-quarter earnings report spooked investors.

The back story. Abercrombie & Fitch stock (ticker: ANF) had gained nearly 25% in 2019, compared with an 12% gain for the broader S&P 500 index through Tuesday’s close.

The retailer’s stock gained more than 20% on March 6 after it reported upbeat fourth-quarter earnings.

Earlier in May, Wedbush analyst Jen Redding lowered her rating of the stock to Underperform from Neutral. She warned investors that shares were “priced for perfection” and could see a downside of more than 20% from her $23 price target.

What's new. In fact, Abercrombie stock fell 25% on Wednesday morning. The company reported a net loss of 29 cents a share in the first quarter, which beat Wall Street consensus estimates of 44 cents a share. Revenue of nearly $734 million was slightly above estimates.

So why such a big drop? Blame management’s forecasts—and the company’s Hollister unit.

Though positive Abercrombie same-store sales growth of 1% beat the negative 1.5% Wall Street had expected, same-store sales growth at Hollister was 1.4 percentage points lower than estimates, according to Redding.

“The miss at Hollister is a shocker,” Redding told Barron’s.

“Shares were rising because everyone thought Abercrombie could work,” Redding said. Investors hadn’t bet on Hollister’s weaker-than expected performance.

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Management expects net sales to be between flat and 2% for the second quarter and same-store sales to be flat. It also forecasts an operating expense of $498 million. For the full year, management expects its gross profit rate to rise from last year’s rate of 60.2%, though that’s assuming only the current tariffs are in place.

Abercrombie stock was down 25% to $18.79 Wednesday morning.

Looking ahead. On Wednesday’s earnings call, another analyst questioned whether poor weather conditions this quarter affected sales. But hopes that better weather could turn around sales in the second quarter is a “Hail Mary,” according to Redding.

“You don’t know the weather is going to be better,” she said. “And you don’t know that this is entirely weather-related.”

The U.S.’s ongoing trade war with China could be a factor in lower retail sales across the board, Redding said, adding that any new tariffs could send Abercrombie stock tumbling once again.

Write to Connor Smith at connor.smith@barrons.com

Corrections & amplifications:

An analyst made a statement about weather conditions during Abercrombie & Fitch’s earnings call Wednesday. An earlier version of this story incorrectly attributed that statement to Abercrombie & Fitch.