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Abercrombie & Fitch Q2 results disappoint; outlook below estimates

New Albany, Ohio -- Abercrombie & Fitch Co. earned $11.4 million for the second quarter, down from $17.1 million in the year-ago period, amid a 10% drop in same-store sales. The retailer, whose results missed analysts' estimates, also gave a third-quarter earnings forecast well below Wall Street expectations.

Abercrombie & Fitch and many other teen retailers have struggled of late, with their sales impacted not only by financially constrained consumers but also by the inherent fickle nature of their customer base.

“One generation of customers has moved on and the next generation doesn't see Abercrombie as cool,” said Erik Gordon, a professor at the University of Michigan's Ross School of Business, in a Reuters report.

Revenue for the period ended Aug. 3 edged down 1% to $945.7 million. In the United States, sales fell 8% including the direct-to-consumer business. Wall Street estimated revenue of $996.7 million.

Same-store sales fell 10%. Same-stores fell 11% in the United States, and 7% overseas. By division, Hollister Co. had the toughest quarter, with a 13% sales drop. The chain's namesake brand reported a 6% decrease, while same-store sales for Abercrombie kids fell 3%.

International sales, including direct-to-consumer, rose 15%. Direct-to-consumer sales for the whole company jumped 21%.

"The second quarter was more difficult than expected due to weaker traffic and continued softness in the female business, consistent with what others have reported. In that context we are planning sales, inventory and expenses conservatively for the remainder of the year," said Abercrombie CEO Mike Jeffries in the release. "Despite the challenging environment, we are very pleased by strong growth in our direct-to-consumer business and continued strong growth in China. We have also made excellent progress on our profit improvement initiative during the quarter, and we now expect savings from this initiative to exceed $100 million annually.”

 

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