Abercrombie & Fitch Q3 Profit More Than Doubles; Stock Surges

(RTTNews) - Teen apparel retailer Abercrombie & Fitch Co. (ANF) reported a third-quarter profit that more than doubled from last year, reflecting benefits related to a change in the estimated annual effective tax rate. But, quarterly net sales were down 4% on a reported basis over the same period a year ago.

Both net sales and adjusted earnings per share for the quarter beat analysts' expectations. The company's shares are gaining almost 22 percent in pre-market trades.

Arthur Martinez, Executive Chairman, said, "Our gross margin rate increased substantially year-over-year, as promotional frequency and intensity were moderated. Expense management remains aggressive. As a result, adjusted operating income improved meaningfully on a constant currency basis. Inventories remain well controlled."

For the fourth quarter of fiscal 2015, the company expects comparable sales to be approximately flat; Gross margin rate to be approximately flat to last year on a constant currency basis; Operating expense to be approximately flat to last year after absorbing a provision for the restoration of incentive compensation.

Net income attributable to the company for the third-quarter surged to $41.89 million or $0.60 per share from $18.23 million or $0.25 per share in the same quarter last year.

Excluding certain items, the company reported adjusted non-GAAP net income per diluted share of $0.48 for the third quarter, compared to adjusted non-GAAP net income per diluted share of $0.42 for the third quarter last year. Analysts polled by Thomson Reuters expected the company to report earnings of $0.22 per share for the third-quarter. Analysts' estimates typically exclude special items. Adjusted non-GAAP net income per share included year-over-year adverse effects from changes in foreign currency exchange rates of approximately $0.13.

Both GAAP and non-GAAP net income per share for the quarter reflected benefits related to a change in the estimated annual effective tax rate. In addition, GAAP and non-GAAP net income per diluted share for the quarter include discrete tax benefits of approximately $0.14 and $0.11, respectively.

Net sales for the third quarter, at $878.6 million, were approximately flat on a constant currency basis, but down 4% on a reported basis over the same period a year ago. Wall Street expected revenues of $864.65 million for the third-quarter. Comparable sales for the third quarter decreased 1%.

The Board of Directors declared a quarterly cash dividend of $0.20 per share on the Class A Common Stock of Abercrombie & Fitch Co., payable on December 9, 2015 to stockholders of record at the close of business on December 1, 2015.

The company expects capital expenditures of approximately $150 million for the full year.

In addition to the 23 new stores opened year-to-date, the company expects to open eight new stores in the fourth quarter, including six international stores and two North American stores. In addition, the company anticipates closing approximately 60 stores in the U.S. during the fiscal year through natural lease expirations.

In the pre-market trade, ANF is currently trading at $23.70, up $4.21 or 21.60%.