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05/29/2019

Abercrombie narrows Q1 loss; closing three more flagships

Abercrombie & Fitch Co. narrowed its first-quarter loss amid positive same-store sales at both its namesake and Hollister divisions.

The retailer continues to focus on its real estate. It plans to close its Hollister flagship in Manhattan’s SoHo district and has exercised the kick-out clause for its namesake flagships in Fukuoka, Japan, and Milan, Italy. The New York and Milan locations are expected to close this year, with the Japan site closing in the back half of fiscal 2020. In aggregate, the three locations represented less than one percent of total net sales in fiscal 2018, Abercrombie said. (As previously announced, the company closed its namesake flagship in Copenhagen in the first quarter of 2019, along with a flagship in Hong Kong, completed in 2017.)

Abercrombie said it remains on track to deliver approximately 85 “new experiences” through new stores, remodels and right-sizes this year.

"We are focused on our transformation initiatives, with global store network optimization a key priority,” said CEO Fran Horowitz. “We continue to believe in stores and are committed to delivering intimate, omnichannel brand experiences that closely align with our customers’ needs.”

Abercrombie’s net loss was $19.2 million, or 29 cents per share, for the quarter ended May 4, compared to a loss of $42.5 million, or 62 cents per share in the year-ago period. Analysts had expected a loss of 43 cents.

Revenue rose to $734.0 million from $730.9 million last year and ahead of estimates of $733.0 million. Same-store sales rose 1%, below estimates. Same-store sales at Abercrombie were up 1%; same-store sales rose 2% at Hollister.

“We achieved our seventh consecutive quarter of positive comparable sales fueled by ongoing strength at Hollister and a return to positive comps at Abercrombie,” said CEO Fran Horowitz.

The SoHo and Fukuoka closures are expected to result in pre-tax lease-related net charges in the second quarter of fiscal 2019 of approximately $45 million. The charges related to the Copenhagen and Milan closures are not expected to be significant in fiscal 2019.

Looking ahead, Horowitz said that, except for the charges for the flagship store actions, the company remains on track to achieve its previously communicated fiscal 2019 outlook and continue to lay the foundation to achieving our fiscal 2020 targets.

For the second quarter, Abercrombie said it expects net sales to be flat to up 2%, short of analysts’ estimates for 2.8% growth. For the full year, Abercrombie estimates net sales to be up 2% to 4%.