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Abercrombie & Fitch lowers outlook; shares fall as results miss

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Abercrombie & Fitch Co. (NYSE:ANF) posted a first quarter loss Friday that nonetheless represented a paring of losses from the same quarter a year ago, but inventory shortage issues and lower same-store sales resulted in missed expectations and a lowering of outlook for the year.

The New Albany, Ohio-based retailer recorded a net loss of $7.2 million for the thirteen weeks that ended May 4, 2013 for a net loss per basic and diluted share of 9 cents, compared to the same figures in the corresponding period a year ago of a net loss of $21.3 million, or 25 cents per share. 

Net sales marked a decrease to $838.8 million from $921.2 million for the year ago period, a drop of 9 per cent.

The results missed analysts' estimates, which called for a loss of 5 cents per share on estimated revenue of $941.7 million.

Total U.S. sales, including the category direct-to-consumer sales, were recorded as $534.9 million, from last year’s $644.3 million - a drop of 17 per cent.

International sales, including direct-to-consumer sales, came in at $303.9 million, compared to the year ago figure of $277.0 million.

The teenwear chain says it now expects full year diluted earnings for the year to come in the range of $3.15 to $3.25 per share, down from the previously published $3.35 to $3.45 per share.

Total comparable sales for the quarter, including direct-to-consumer sales, were down 15 per cent, which breaks down to a 17 per cent drop on comparable store sales and a 6 per cent decrease on comparable direct-to-consumer sales. 

In regional terms, U.S. comparable sales decreased 14 per cent in the quarter, while international comparable sales were down 16 per cent.

Sales by brand were down across the board, with the Abercrombie & Fitch brand decreasing 13 per cent to $325.0 million, the Hollister Co. brand taking an 18 per cent tumble to hit sales of $421.2 million and the abercrombie kids brand dropping by 5 per cent to $73.0 million.

Gross profit of $553,166 for the quarter was reported for a margin of 65.9 per cent, up on the year ago figures of $541,092 and 58.7 per cent, while the cost of goods sold for the quarter was down, coming in at $285,603 or 34.1 per cent of net sales, compared to $380,126 or 41.3 per cent of net sales for the year before.

The expenses associated with stores and distribution were recorded at $449,125 or 53.5 per cent of net sales for the quarter, against $ 455,732 or 49.5 per cent of net sales a year ago, while expenses that fell under the line item ‘marketing, general and administrative’ were up, coming in at $118,780 or 14.2 per cent of net sales for the quarter, compared to $ 116,889 or 12.7 per cent of net sales the year before.

"Our results for the first quarter reflect a sixteen cent improvement in earnings per share versus last year, including better than expected gross margin rate improvement and tight expense management,” said chief executive officer and chairman of the board Mike Jeffries.

“The first quarter proved to be more difficult than expected on the top-line due to more significant inventory shortage issues than anticipated, added to by external pressures. However, comparable sales trends progressively improved during the quarter and with the inventory headwinds largely behind us, we expect to see continued sequential improvement in the second quarter.”

Shares in the company were trading down on the NYSE, falling 9.6 per cent to $49.13 from a previous close of $54.37.

 

Quick facts: Abercrombie & Fitch

Price: 16.9 USD

NYSE:ANF
Market: NYSE
Market Cap: $1.06 billion
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