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Abercrombie exec shakeup despite strong Q3; closing fewer stores than expected

Abercrombie & Fitch is changing up its executive ranks on the heels of better-than-expected third quarter earnings and revenue fueled by continued strength at its Hollister division.

The apparel retailer announced that Kristin Scott, currently brand president of Hollister Co., has been appointed to the newly created role of president, global brands, effective immediately. She will be responsible for driving the growth of all Abercrombie brands globally.

Additionally, the company said it has eliminated the individual brand president positions and that Stacia Andersen, brand president of Abercrombie & Fitch and abercrombie kids, will be leaving the company. As part of the organizational change, the company will combine the leadership of planning and inventory management into a cross-brand role, overseeing Abercrombie & Fitch adult and Hollister brands, reporting to Scott.

“With strong foundations in place across brands, our playbooks working, and a solid start to the holiday season, these organizational changes are part of the continuing transformation of our business to support our longer-term global growth ambitions,” said CEO Fran Horowitz.

Abercrombie’s net income jumped to $23.9 million, or 35 cents a share, in the quarter ended Nov.3, up from $10.0 million, or 15 cents a share, in the year-end period. Adjusted per-share earnings came to 33 cents, easily besting Street estimates of 20 cents.

Net sales inched up 0.2% to $861 million, ahead of the $854 million analysts had expected consensus. The increase came despite adverse impacts from the calendar shift and foreign currency, the company noted.

Total same-store sale rose 3%, also more than expected. It was Abercrombie’s fifth consecutive quarter of positive comp sales. Same-store sales at Hollister rose 4%, and 1% at Abercrombie. Same-store sales increased 6% in the U.S., but fell 3% internationally. Digital sales were up 16%, and were approximately 28% of total net sales for the quarter, compared to approximately 24% last year.

Horowitz said the company had a "solid start" to the holiday season, and was well-positioned “to deliver top-line growth, gross profit rate expansion and operating expense leverage for the full year.”

Abercrombie had been planning to close 60 stores by the end of this year, the majority in the U.S. But it said it now expects to close 40 stores by year-end, “based on improved performance and successful lease renegotiations.”

Neil Saunders, managing director, GlobalData Retail, commented that Abercrombie’s results show the company’s recovery program remains on track and justify the changes that have been made to such things as fabrication, detailing and styling of the product set.

“In our view, the range - especially at Abercrombie - is now more sophisticated, is more on-trend, and better reflects what modern consumers want,” he said. “There is also a cohesiveness to the assortment which stimulates multiple purchases and helps to push up average transaction values. As good as these things are, we still believe that both brands have more to do in making consumers aware of the changes and getting them to take a fresh look at the brands.” For more analysis, click here.

The retailer is expecting fourth-quarter sales to be down in the mid single digits, below analysts’ estimates for gain of about 9%. It is expecting same-store sale in the low single digits. For the full year, it is expecting sales to rise 2% to 4% and same-store sales to rise by the same amount.
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