Abercrombie & Fitch Q3 profits nosedive, but better than expected

New Albany, Ohio Abercrombie & Fitch reported Friday a much better-than-expected quarterly profit, helped by aggressive cost-cutting measures.

Net income for the third quarter ended Oct. 31 fell 39% to $38.8 million, from $63.9 million a year earlier.

Net sales fell 15% to $765.4 million as same-store sales fell 22%.

By division, same-store sales declined 18% at the flagship Abercrombie & Fitch chain; 22% at the abercrombie kids' chain; 26% at Hollister and 30% at Ruehl, which the company is planning to close by the end of the current fiscal year.

Abercrombie said it expected to incur charges of $60 million to exit the Ruehl business, which is down from its prior estimate of $65 million.

One bright spot for Abercrombie was direct-to-consumer sales, including Web sales, which rose 11% to $63.9 million.

Brick-and-mortar expansion, though slowed, continues. During the third quarter, the company opened a flagship location in Milan, Italy, with Abercrombie & Fitch and abercrombie kids stores, as well as two Hollister mall-based stores in the United Kingdom, one domestic Hollister store and one domestic abercrombie kids store.

The retailer said it is on track to open an Abercrombie & Fitch flagship store in Tokyo in December, as well as five more Hollister stores in Europe during the fourth quarter. It will open a Hollister Epic on Fifth Avenue in Manhattan where it had previously been planning to open an abercrombie kids flagship.

In the next fiscal year, the company said it expects to open flagship Abercrombie & Fitch stores in Copenhagen, Denmark, and Fukuoka, Japan.

The company said it continues to expect total capital expenditures for fiscal 2009 to be approximately $185 million.