More bad news for Abercrombie & Fitch

Although controversial Abercrombie & Fitch CEO Mike Jeffries said he was pleased that the company’s earnings for the first quarter ended May 3 were in line with expectations, comparable-store sales dropped for the ninth straight quarter.

The company widened its loss in the quarter to $23.7 million, or 32 cents per share, from $7.2 million, or 9 cents per share, in the prior-year quarter. Total net sales decreased 2% to $822.4 million, while comparable-store sales decreased 4%.

Heavy discounts hurt margins and fueled Abercrombie & Fitch’s loss in the quarter. Jeffries, however, cited a difficult teen retail environment and said the company's comparable-store sales were on the right track.

"Overall sales for the quarter decreased 2%, which included strong growth in our direct-to-consumer business,” said Jeffries. “In addition, comparable sales continued to head in the right direction, and included significant sequential improvement in our female business and our Abercrombie & Fitch brand as a whole.

Net sales by brand for the first quarter were $317.8 million for Abercrombie & Fitch, $68.5 million for Abercrombie Kids and $421.6 million for Hollister Co. Comparable sales by brand, including direct-to-consumer, decreased 1% for Abercrombie & Fitch, decreased 6% for Abercrombie Kids and decreased 7% for Hollister Co.

Restructuring charges associated with the closure of the company’s 24 Gilly Hicks stand-alone stores were $5.6 million for the quarter, primarily related to lease exit costs. Gilly Hicks intimate apparel continues to be offered through Hollister stores and the direct-to-consumer business.

Abercrombie & Fitch is maintaining its guidance of full year diluted earnings per share in the range of $2.15 to $2.35, based on the assumption that full year comparable sales will decrease 3-4%.

The company anticipates opening 15 full-price international stores throughout the year, including a small number of Abercrombie & Fitch international mall-based stores, plus approximately 8 to 10 international and U.S. outlet stores during the fiscal year. It expects to close approximately 60 to 70 stores in the U.S. during the fiscal year through natural lease expirations.



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