DOW JONES NEWSWIRES
Abercrombie & Fitch Co.'s (ANF) fiscal fourth-quarter net
income dropped 68% on falling margins and weak same-store sales at
the teen-apparel chain.
The company won't provide any guidance for the new year because
of economic volatility as it reviews costs, noting some cuts have
already been made. Abercrombie didn't give further details Friday;
last month, the company cut 50 jobs at its corporate
headquarters.
Many clothing retailers have said the holiday season, usually a
period of strong sales, was weak as consumers continued to try to
cut back on discretionary purchases amid the global recession.
Abercrombie, which sells upscale casual clothing, has been
particularly hard hit as customers trade down to cheaper
competitors and the company refuses to offer discounts on its
merchandise.
Abercrombie's shares were up 6.3% at $22 in premarket trading as
the results topped analysts' expectations and the company said
capital spending will drop sharply this year. The stock has tumbled
74% the past year through Thursday.
Chief Executive Mike Jeffries said the company was satisfied
with its fourth-quarter results, saying same-store sales fell less
than it had expected. The drop was 25%.
"The fourth quarter proved to be a catastrophe for the retail
industry; a nightmare that included unprecedented promotional
activity by other retailers in the malls and consumers who
continued to show reluctance to spend, especially for premium
brands," Jeffries said.
For the period ended Jan. 31, Abercrombie posted net income of
$68.4 million, or 78 cents a share, down from $216.8 million, or
$2.40 a share, a year earlier. The latest results included charges
of 32 cents a share on Jeffries' new employment agreement and
write-downs of some store-related assets.
Revenue decreased 19% to $998 million.
Analysts surveyed by Thomson Reuters expected earnings of $1 a
share and revenue of $997 million.
Gross margin fell to 64.4% from 67.2% on increased markdowns to
clear seasonal inventory.
Analysts and investors have begun to question Abercrombie's
no-discount strategy. The company has said under no conditions will
it reduce prices for customers any more than usual. It is also
pushing forward with an aggressive overseas expansion and has kept
inventory at similar levels to before the slump.
Meanwhile Abercrombie forecast 2009 capital spending of $165
million to $175 million. At this time last year, the company
predicted capital spending for just the first half of 2008 of $420
million to $425 million.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com