A&F reports 4% 2Q net income drop

NEW ALBANY, Ohio Abercrombie & Fitch Co. reported second-quarter net income of $77.8 million, or 87 cents per diluted share, for the thirteen weeks ended Aug. 2, a 4% decrease compared to net income of $81.3 million, or 88 cents per diluted share, for the like period in 2007.

Net sales for the quarter increased 5% to $845.8 million from $804.5 million in 2007. Comparable-store sales decreased 4%.

The gross profit rate for the quarter was 70.1%, up 130 basis points compared to last year. Operating income for the second quarter was $124 million, compared to $124.1 million last year.

Interest income for the second quarter decreased to $1.8 million, compared to $4.1 million last year. The decrease was attributed to a lower average rate of return on investments, compared to last year, primarily due to a restructuring of the investment portfolio.

The company expects net income per diluted share for the second half of fiscal 2008 to be in the range of $3.40 to $3.45. Based upon this guidance, the company now expects full-year fiscal 2008 net income per diluted share to be in the range of $4.95 to $5.00. The low end of the guidance reflects a negative 7% comparable-store sales scenario, which is consistent with the trend in July, approximately $10 million in incremental expense from minimum wage rate and manager salary increases, and approximately $11.5 million in preopening rent expense for future flagship stores.

The company plans total capital expenditures for fiscal 2008 to be between $405 million and $410 million, with approximately $285 million of this amount allocated to new store construction and store remodels. The company now expects to open 99 new stores in North America, including two Abercrombie & Fitch stores, 66 Hollister Co. stores, 12 abercrombie stores, six RUEHL stores, 11 Gilly Hicks stores and two outlet stores. The company also plans to open three Hollister Co. stores in the United Kingdom.