Abercrombie & Fitch Co.'s (ANF) fiscal fourth-quarter
earnings fell 31% as the teen casual-clothing retailer's sales and
margins continued to fall, but at a slower rate.
The company stepped up discounting in the second half of last
year after it tried to maintain its prestige during the recession
by resisting markdowns despite shoppers' migration to lower-priced
apparel. The strategy battered its same-store sales figures, which
consistently underperformed rivals. After its high-end Ruehl
business posted continually depressed results, Abercrombie decided
to close the chain, which was completed last month.
Abercrombie, known for its risque catalogs and promotional
photography, has also admitted to missing some fashion trends a
year ago. It has vowed to avoid that mistake again, and it is also
making an aggressive overseas push. In the most recent period,
international sales surged 86% as domestic sales dropped 12%,
although international revenue still represents a much smaller
proportion of the company's total intake.
However, the company may be on the cusp of a turnaround. While
same-store sales for the quarter were down 13%, they surprisingly
rose 8% in January. Chairman and Chief Executive Mike Jeffries said
Tuesday the company's goals for 2010 were to grow internationally
and increase domestic profitability.
For the quarter ended Jan. 30, Abercrombie & Fitch posted a
profit of $47.5 million, or 53 cents a share, from $68.4 million,
or 78 cents a share, a year earlier. Excluding losses from
discontinued operations and write-downs, earnings fell to 91 cents
from $1.06. Analysts surveyed by Thomson Reuters predicted 87
cents.
The company said revenue decreased 4.6% to $936 million. The 13%
drop in same-store sales came in spite of an easy comparison with a
year earlier, when comparable-store sales were down one-fourth, but
the rate was a marked improvement from previous quarters.
Direct-to-consumer revenue, which includes Internet and catalog
sales, was flat after rising nearly one-fourth in the previous
quarter.
Gross margin fell to 63.5% from 64.6% because of lower average
unit prices. Inventories declined 17%.
Shares in Abercrombie closed Friday at $33.85 and weren't active
premarket. The stock, which has more than doubled from the
eight-year low late last November, is up by about half in 2009.
-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291;
joan.solsman@dowjones.com