Abercrombie & Fitch Posts Loss In Q3, Sales Drop 12%

(RTTNews) - Casual apparel retailer Abercrombie & Fitch Co. (ANF) Thursday reported a loss for the third quarter, compared to a profit last year, amid lower sales as well as charges related to the restructuring of its Gilly Hicks brand. The company backed its profit forecast issued earlier this month.

Mike Jeffries, CEO, said, "Our results for the third quarter reflect weakness in top-line performance, which we expect to continue in the fourth quarter. However, we continue to work hard to offset these conditions and are aggressively pursuing initiatives we believe will improve the sales trend as we go forward.''

Net loss for the quarter was $15.64 million or $0.20 per share compared to profit of $84.04 million or $1.02 per share in the previous year. Excluding charges related to restructuring, asset impairment and profit improvement initiative, the company reported net income of $40.5 million or $0.52 per share. Results for the quarter included a tax benefit of $0.06 per share related to certain discrete tax matters.

On average, 35 analysts polled by Thomson Reuters expected earnings per share of $0.45 for the quarter. Analysts' estimates typically exclude one-time items.

Net sales declined 12 percent to $1.033 billion from $1.17 billion in the prior year, missing consensus estimates of $1.06 billion.

The company had released its sales figures on November 5, when it said the results reflect continued top-line challenges, with overall spending among younger consumers remaining weak.

Including direct-to-consumer, total U.S. sales decreased 18 percent to $674.9 million and total international sales rose 2 percent to $358.4 million. Total company direct-to-consumer sales, including shipping and handling, increased 10 percent to $174.6 million.

Total comparable sales, including direct-to-consumer sales, decreased 14 percent with a 14 percent drop in comparable U.S. sales and a 15 percent decrease in comparable international sales. Total direct-to-consumer comparable sales increased 11 percent for the quarter. Within the quarter, comparable sales were weakest in August and September, the retailer noted.

By brand, including direct-to-consumer, comparable sales decreased 13 percent for Abercrombie & Fitch, declined 4 percent for abercrombie kids and dropped 16 percent for Hollister Co.

The company estimates to incur pre-tax charges of $90 million related to the restructuring of the Gilly Hicks brand. Of these charges, $37.9 million was recorded in the third quarter as asset impairment charges and $6.8 million as lease related and other charges. The company expects the remaining charges to be substantially recognized in the fourth quarter and the first quarter of Fiscal 2014.

Based on a projected low double digit decrease in comparable sales for the fourth quarter, the company expects full year adjusted earnings per share to be in the range of $1.40 to $1.50. Analysts project earnings per share of $1.48 for the year.

This projection assumes significant gross margin rate erosion in the fourth quarter with gross margin rate approximately flat year over year on a full year basis.

ANF, which closed at $34.99 on Wednesday, fell 2.1 percent in pre-market activity.