Abercrombie narrows Q2 loss but sales miss

Abercrombie & Fitch narrowed its loss in the second quarter, even as sales at its fast-growing Hollister division cooled.

Abercrombie’s net loss narrowed to $3.9 million, or 6 cents a share, in the quarter ended August 4, from $15.5 million, or 23 cents a share, in the year-ago period. Adjusted earnings per share came to 6 cents. Analysts had expected a loss of 4 cents a share.

The apparel retailer’s revenue rose to $842.4 million from $779.3 million, missing estimates of $845.1 million. Direct-to-consumer net sales increased 16% from last year to $216.4 million and were approximately 26% of total net sales for the quarter, compared to approximately 24% last year.

Same-store sales rose 3%, below expectations. By brand, same-store sales rose 4% at Hollister, missing analysts’ estimates, and 2% at Abercrombie.

“During the second quarter, we delivered both top and bottom line growth, while continuing to invest in the transformation of our business,” said Fran Horowitz, CEO. “Our results reflect another quarter of profit improvement fueled by comparable sales growth across both brands, gross margin expansion and expense leverage as we continue to execute our playbooks. Hollister continued its momentum with another quarter of strong sales growth and Abercrombie posted its third consecutive quarter of positive comparable sales, led by strength in the U.S.”

The company plans to open 22 full-price stores in fiscal 2018, including 13 Hollister and nine Abercrombie stores. In addition, it anticipates closing up to 60 stores, primarily in the U.S., through natural lease expirations.

Abercrombie affirmed its 2018 growth outlooks for both net sales and same-store sales at 2% to 4%.