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Abercrombie & Fitch moves to Q2 loss


New Albany, Ohio Abercrombie & Fitch posted a loss for the second quarter as sales slumped amid the recession and it began closing its Ruehl division. The retailer, however, said it remained on track with its international expansion plans.

Abercrombie recorded a net loss of $26.7 million for the quarter ended Aug. 1, compared with profit of $77.8 million a year ago. The results included $24.4 million in charges for the closing of the 29 Ruehl stores and store asset impairment charges.

Revenue fell 23% to $648.5 million. Same-store sales were down 30% in the quarter, hurt by double-digit declines across all divisions. Same-store sales fell 27% at namesake stores, 29% at Abercrombie stores, 33% at Hollister and 31% at Ruehl.

Abercrombie CEO and chairman Mike Jeffries stated: "We continued to be confronted with very challenging conditions during the second quarter. We believe we are doing the right things to address those challenges and improve our domestic business. In the meantime, we remain very encouraged by our prospects for international growth."

Abercrombie has suffered from keeping prices relatively high as its competitors focused on value amid the recession. The company recently started planning more sales and offering lower entry-level merchandise, but that has not stemmed its sales slump.

Many analysts believe Abercromie’s best prospects for long-term growth lie abroad. The chain said it remained on track to open three international flagship locations in fiscal 2009, including two stores in Milan and one outlet in Tokyo. It also plans to open 10 mall-based stores in the period, including one Abercrombie store in Canada and seven Hollister stores in Britain.

Domestically, Abercrombie plans to open nine mall-based stores in fiscal 2009, including two Abercrombie stores, four Hollister stores, one Gilly Hicks store and two outlet stores.

The company now expects total capital expenditures for fiscal 2009 to be approximately $185 million, including approximately $140 million related to new stores, store refreshes and remodels, and approximately $45 million related to information technology, distribution center and other home-office projects. The reduction in capital expenditures from the previously announced estimate of $200 million is primarily a result of lower than expected construction costs related to store openings, timing effects related to 2010 store openings, and the reduction and postponement of non-essential projects related to existing stores.

The company slashed marketing, general and administrative costs during the quarter, down 19% to $88.7 million from $109 million last year, including $600,000 in severance charges related to Ruehl.

Abercrombie expects the closing of Ruehls, which should be complete by the end of the fiscal year, will cost $65 million, including the $23.6 million incurred in the second quarter.

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