Abercrombie & Fitch profit plummets as turnaround effort stalls

Abercrombie & Fitch’s efforts to turnaround its struggling namesake brand aren’t finding much traction with shoppers.



The teen apparel brand on Friday said that its profit declined 81% in the third quarter and warned that it expects a challenging holiday season for its namesake banner.



Abercrombie posted net income of $7.88 million, or 12 cents per share, for the quarter ended Oct. 29, down from $41.9 million, or 60 cents per share, in the year-ago period.



Earnings, adjusted for non-recurring gains, were 2 cents per share. Analysts had expected earnings of 19 cents per share.



Revenue fell 6% to $821.7 million, missing the $830.6 million that analysts expected. By brand, net sales for the third quarter decreased 13% to $358.3 million for Abercrombie and decreased 1% to $463.5 million for Hollister.



Total same-store sales fell 6% in the quarter, worse than analysts had expected. Sales at the company’s namesake brand fell 14%, and were flat at its Hollister banner.



The company cited weak traffic at its tourist and flagship Abercrombie locations.



“In addition, chain store traffic patterns remained negative,” said executive chairman Arthur Martinez. “Weakness in A&F was compounded by underperformance of seasonal categories, which ultimately led to pressure on gross margin. While we anticipate the A&F business will remain challenging through the balance of the fiscal year, we continue to move aggressively to evolve the brand across all channels through significant changes in product, customer experience and marketing. A comprehensive set of strategic and operational actions is being taken by an experienced team under new leadership, and we expect to see benefits as our efforts gain traction. While we anticipate the A&F business will remain challenging through the balance of the fiscal year, we continue to move aggressively to evolve the brand across all channels through significant changes in product, customer experience and marketing.”



The retailer anticipates closing approximately 35 stores in the U.S. in the fourth quarter through natural lease expirations, in addition to the 15 stores closed year to date.