Abercrombie & Fitch Swings into Q3 Loss, Sales Falter

A&FNew York—Reporting its seventh straight quarter of comparable store losses, Abercrombie & Fitch today swung into a third quarter net loss.

For the quarter ended Nov. 2, Abercrombie posted a net loss of $15.6 million, or 20 cents a share, compared with net income of $84 million, or $1.02 a share, a year earlier. Excluding costs related to the closing of its Gilly Hicks stores and other charges, adjusted earnings would be 52 cents a share, better than the 44 cents a share analysts had expected.

Net sales fell 11.7% to $1.03 billion while total comparable sales, including online sales, fell 14%.

‘An Intensely Promotional Time’

By division, Abercrombie & Fitch posted a 13% comp sales decline while Abercrombie Kids was down 4%. Hollister Co. reported a 16% decrease in its comp store sales.

“Our results for the third quarter reflect weakness in top-line performance, which we expect to continue in the fourth quarter,” said CEO/Chairman Mike Jeffries. “We are in an intensely promotional time today.”

Abercrombie announced earlier this month its planned to close all 28 Gilly Hicks stores, a move that weighed on the third quarter results. Gross margin contracted 130 basis points to 63% driven by inventory write-downs related to the closed Gilly Hicks stores.

Stores and distribution expenses, as a percentage of sales, increased 400 bps to 46.5% from last year, due to the impact from comps decline and higher direct-to-customer expenses, “offset partly by lower store payroll, store management and support expenses; as well as other stores and distribution costs.”

Looking ahead, Abercrombie & Fitch kept its full year adjusted earnings outlook of $1.40 to $1.50 a share. Analysts’ consensus expects $1.55 a share.

The teen retailer said its forecast is based on a projected low double-digit percentage decline in fourth-quarter comp store sales.

 

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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com