Teen apparel retailer Q1 beats Street as buyout talks heat up

A strong performance by Hollister helped Abercrombie & Fitch Co. beat first quarter sales and earnings expectations even as its namesake brand continues to struggle.



The teen apparel retailer's better than expected quarterly showing comes as speculation about its future heats up. Abercrombie previously confirmed it is in preliminary discussions with several parties regarding a sale of the company.



Those talks seem to be heating up. American Eagle Outfitters has teamed up with private equity firm Cerabus Capital Management to work on a joint bid for the company, according to The Wall Street Journal. American Eagle's offer will go against offers from other companies, including Express and buyout firms, also interested in acquiring the chain, the report said.



For the quarter ended April 29, Abercrombie reported a net loss of $61.7 million, or a loss of $0.91 per share. In the year-ago period, the chain re-ported a loss of $39.6 million, or $0.59 per share.



Net sales fell 4% to $661.1 million, beating analysts’ expectations of $651.3 million. Same-store sales slid 3%, beating analysts’ expected decline of 3.4%. By brand, same-store sales rose 3% at Hollister, and fell 10% at Abercrombie.



Hollister’s net sales increased 3% to $374.7 million, while Abercrombie decreased 11% to $286.4 million. Direct-to-consumer sales grew to approximately 27% of total company net sales for the first quarter, compared to approximately 24% last year.



"We are encouraged by our progress across all brands, particularly in March and April as a whole, in an aggressively promotional environment,” said Fran Horowitz, Abercrombie & Fitch Co. CEO. “We are pleased with the performance of our largest brand, Hollister, as our strategic initiatives continue to deliver. Abercrombie comparable sales were in line with our expectations as we continue to apply the learnings from Hollister's successes.”



The company plans to continue focusing on customer relationships to “adapt and execute better and faster, ensuring more consistent delivery of the right product at the right time, with the right brand voice, and through the right brand experience,” Horowitz said.



The CEO is also bullish on a strong second quarter, driven largely by the Hollister brand and digital efforts.



“While we anticipate the second quarter environment to remain promotional, we expect results to improve further in the second half of the year, as we see returns from our strategic investments in marketing and omnichannel,” Horowitz reported. "The international roll-out of full omnichannel capabilities, coupled with insights from multiple customer touchpoints online and in-store, including our rapidly growing loyalty programs, means we are better equipped to anticipate our customers' needs whenever, wherever and however they choose to engage with our brands."