Abercrombie & Fitch Reports Drop in Quarterly Sales
August 30 2016 - 8:20AM
Dow Jones News
Abercrombie & Fitch Co. posted a decline in quarterly sales
and gave a more cautious outlook for the year, as the apparel
retailer struggled to attract shoppers to its mall-based
outlets.
Shares of Abercrombie, which had risen 20% over the past year,
fell 11% to $20.37 in premarket trading Tuesday.
Sales at stores open at least a year are expected to "remain
challenging" through the second half of the year, the company said.
In May, the company expected "better results" in the back of the
year following assortment changes and other investments.
Executive Chairman Arthur Martinez cited "traffic headwinds in
the domestic mall business" and a "significant drop-off" in
tourism. "We do not see those headwinds materially changing in the
next few months," he said in an interview.
The New Albany, Ohio, company said sales at stores open at least
a year fell 4% in the fiscal second quarter ended July 30, matching
the first quarter decline and the results in the same period last
year. Analysts had expected a 4.2% decline.
The company's Hollister brand, which has been a bright spot in
past quarters, lost steam. Hollister sales at stores open at least
a year fell 2%, while that metric fell 7% at Abercrombie.
The company's namesake brand released a new assortment in recent
months, reflecting a different look from its highly sexualized
image of previous years. The clothing, however, still features
denim and other basics—a market with many ailing competitors.
"What will set us apart is the quality we invest in the product,
the patterns we use, particularly in the tops business, and the
value for money," said Mr. Martinez.
Total revenue fell 4% to $783.2 million for the quarter. The
company's net loss was $13.1 million, or 19 cents a share, compared
with $0.8 million, or 1 cent, a year ago. Analysts had expected a
loss of 20 cents a share on $783 million of revenue, according to
FactSet.
Mr. Martinez said the company is continuing to hold the line on
promotions. "We took our foot off the gas on discounting in the
second quarter," he said. "We believe it is right for the
brand."
One source of improvement was its digital performance.
Direct-to-consumer sales grew to approximately 23% of total company
sales for the second quarter, compared with 21% last year. Mr.
Martinez attributed the increase to progress made on website design
and omnichannel initiatives.
The company also recently expanded its reach across the web by
entering into a wholesale agreement with Zalando SE, an online
fashion retailer based in Europe. Last week, Abercrombie and
Hollister products were made available to the site's 18 million
active customers. "It's about creating ubiquity for the brand,"
said Mr. Martinez.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com
(END) Dow Jones Newswires
August 30, 2016 08:05 ET (12:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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