Abercrombie & Fitch Swings into Q3 Loss, Sales Falter

In Industry News, Reports, What's New by Jeff PrineLeave a Comment

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.