Abercrombie & Fitch Q2 Profit Drops On Weak Traffic, Softness In Female Business

(RTTNews) - Casual apparels retailer Abercrombie & Fitch Co. (ANF) Thursday reported lower profit for a difficult-than-expected second quarter that was marked by weaker traffic and continued softness in the female business.

Mike Jeffries, CEO, said, "The second quarter was more difficult than expected due to weaker traffic and continued softness in the female business, consistent with what others have reported. In that context we are planning sales, inventory and expenses conservatively for the remainder of the year."

Yet, the retailer saw strong growth in its direct-to-consumer business and continued strong performance in China.

Net income fell to $11.37 million or $0.14 per share from $17.05 million or $0.20 per share in the previous year. Prior-year results have been restated. The latest results included $0.02 per share in charges related to the implementation of the on-going profit improvement initiative.

On average, 32 analysts polled by Thomson Reuters expected earnings per share of $0.28 for the quarter. Analysts' estimates typically exclude one-time items.

Net sales slid 1 percent to $945.7 million from last year's $951.41 million. Analysts estimated revenues of $996.17 million for the quarter.

Including direct-to-consumer, total U.S. sales slid 8 percent to $597.3 million, while total international sales climbed 15 percent to $348.4 million.

Total company direct-to-consumer sales, including shipping and handling, increased 21 percent to $154.3 million.

Comparable sales, including direct-to-consumer sales, dropped 10 percent. Comparable U.S. sales fell 11 percent and comparable international sales decreased 7 percent. Comparable sales were weakest in July.

By brand, including direct-to-consumer, comparable sales decreased 6 percent for Abercrombie & Fitch, dropped 3 percent for abercrombie kids, and declined 13 percent for Hollister Co.

During the quarter, the retailer opened four international Hollister chain stores, including two stores in China. Additionally, the company opened a combined Abercrombie & Fitch and abercrombie kids outlet store in each of the U.K. and U.S.

The company incurred higher Stores and Distribution expense as well as Marketing, General and Administrative expense in the quarter.

Assuming that third-quarter comparable sales would be down slightly more than in the second quarter, the firm sees third-quarter earnings per share in the range of $0.40 - $0.45. Wall Street looks for quarterly earnings of $1.06 per share.

Abercrombie & Fitch did not provide guidance beyond the third quarter due to lack of visibility stemming from recent traffic trends.

On August 20, the board declared a quarterly cash dividend of $0.20 per share on Class A common stock.

The company continues to expect opening an Abercrombie & Fitch flagship store in Seoul, as well as around 20 international Hollister chain stores throughout the year.

The planned opening of an Abercrombie & Fitch flagship store in Shanghai is now expected in Spring 2014. ANF, which closed at $46.80, on Wednesday, plunged 17 percent in pre-market activity.