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Global challenges weigh on Abercrombie’s Q3 results; tariffs to impact Q4 profit

Abercrombie & Fitch store

Abercrombie & Fitch reported mixed results for its third quarter as a “complicated” global environment offset U.S. same-store gains in its namesake and Hollister brands.

The apparel retailer’s net income totaled $6.523 million, or 10 cents a share, in the quarter ended Nov. 2, down from $23.9 million, or 35 cents a share, in the year-earlier period. Adjusted earnings came to 23 cents, just missing Street estimates of 24 cents.  

Sales rose to $863.5 million from $861.2 million, missing analysts’ estimates of $868.0 million. Same-store sales were flat. Hollister and Abercrombie both delivered positive U.S. comps, resulting in a total U.S. comp gain of 3%, which was offset by international comps of negative 8%, the company said. 

"We achieved another quarter of constant currency revenue growth and positive U.S. comps across brands, while maintaining tight expense management,” stated CEO Fran Horowitz. “Continued U.S. momentum was offset by challenges across several of our key international markets as well as a complicated global operating environment, which weighed on overall results.”

Abercrombie now expects fiscal 2019 sales and same-store sales to be flat to up 1% and for fourth-quarter sales and same-store sales to be flat to up 2%. It expects China tariffs to shave about $4 million off gross profit in the fourth quarter and $5 million in the full year. About 25% of the company's merchandise in fiscal 2018 was sourced from China. 

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