Abercrombie & Fitch Q4 Profit Falls on Dismal Sales

In Industry News, Reports, What's New by Jeff Prine

A more clean cut Americana image is replacing former CEO Mike Jeffries' longtime more provocative imagery at Abercrombie

A more clean cut Americana image is replacing former CEO Mike Jeffries’ longtime more provocative imagery at Abercrombie

New Albany, OH—Another bleak day for beleaguered Abercrombie & Fitch. The teen specialty retailer reported its fourth quarter revenue missed estimates as sales fell.

For its holiday quarter ended Jan. 31, Abercrombie posted a 14.2% drop in net income to $44.4 million, or 63 cents a share, from $66.1 million, or 85 cents a share, a year earlier. That actually was in line with analysts’ estimates, however.

But sales really missed: falling 13.8% to $1.12 billion, below forecasts for $1.17 billion, “primarily due to dismal comparable store sales performance, negative impact from foreign currency translations and net store closures.”

Currency Pressure

Speaking of dismal, comparable store sales fell 10%. Abercrombie & Fitch comps declined 9%, Abercrombie Kids comps declined 6% and Hollister comps fell 11% during the quarter.

“We expect the first half of 2015 to remain challenging, with declines in our logo business in 2014 persisting in the early part of 2015, but at reduced rates, as well as significant currency pressure,” Executive Chairman Arthur Martinez said in a statement. “However, we believe that the benefits of all of the changes we have made will be reflected in improved performance in the second half of the year.”

Martinez pointed to several initiatives all aimed at improving domestic and international comps as well as investing in direct-to-consumer and omnichannel retail. Abercrombie also seeks to cut costs and expand internationally in high growth markets.

Moreover, the company said it expects “significant headwind” from foreign currency exchange rates in 2015. The negative impact on comps from reduced logo sales is expected to “modestly abate in the first half of the fiscal year and neutralize in the second half of the fiscal year.”

AEO Rebounds

Teen retailers have had a difficult time as young consumers move toward fast-fashion retail brands such as H&M and Forever 21.

One of Abercrombie’s chief rivals, American Eagle Outfitters reported today that its fourth quarter earnings grew 33.3% to 36 cents a share, topping estimates by 2 cents. Revenue increased 2.9% to $1.07 billion, edging past estimates for $1.06 billion.

Total comp store were flat, AEO stated. “The team executed well through an incredibly challenging macro environment,” said Interim CEO Jay Schottenstein in a statement. “Improved merchandise assortments, combined with a better customer experience, drove strengthened sales trends and we successfully reduced promotions.”