Abercrombie & Fitch Swings To Profit In Q3, But Provides Weak Outlook

(RTTNews) - Specialty retailer of casual apparels Abercrombie & Fitch Co. (ANF) reported Wednesday a profit for the third quarter compared to a loss last year, despite lower gross margins and a revenue decline, reflecting significantly lower charges.

Adjusted earnings per share topped analysts' expectations by a penny, while quarterly sales missed their estimates. The company also provided adjusted earnings guidance for the full-year 2014, below Street view.

"As referenced in our earlier Business Update, our third quarter results were disappointing in what remains a very challenging environment for young apparel. Comparable sales improved somewhat in November, and this improvement was maintained through the Black Friday weekend," CEO Mike Jeffries said.

The New Albany, Ohio-based retailer reported net income of $18.23 million or $0.25 per share for the third quarter, compared to a net loss of $15.64 million or $0.20 per share in the prior-year quarter.

Excluding items, adjusted net income for the quarter was $30.41 million or $0.42 per share, compared to $40.55 million or $0.52 per share in the year-ago quarter.

On average, 30 analysts polled by Thomson Reuters expected the company to report earnings of $0.41 per share for the quarter. Analysts' estimates typically exclude special items.

Total net sales for the quarter declined 12 percent to $911.45 million from $1.03 billion in the same quarter last year, and missed twenty-nine Wall Street analysts' consensus estimate of $916.03 million.

Comparable store sales, including direct-to-consumer sales, decreased 10 percent.

U.S. sales, including direct-to-consumer sales, declined 12 percent to $594 million, and international sales, including direct-to-consumer sales, also decreased 12 percent to $317 million from last year.

Gross margin for the quarter contracted 80 basis points from last year, reflecting lower average unit cost amid increased promotional activity.

The company said it incurred restructuring charges of $44.7 million last year related to asset impairment, lease termination and other charges associated with the restructuring of the Gilly Hicks brand.

The company also incurred asset impairment charges of $16.7 million, compared to $43.6 million last year, related to stores whose asset carrying value exceeded fair value.

Looking ahead to fiscal 2014, the company expects adjusted earnings in a range of $1.50 to $1.65 per share. Street is currently looking for full-year 2014 earnings of $1.74 per share.

The projection assumes a mid-to-high single-digit percentage decrease in comparable store sales for the fourth quarter.

"However, we expect conditions to remain difficult through the balance of the fourth quarter," Jeffries added.

ANF closed Tuesday's regular trading session at $27.84, down $0.34 on a volume of 3.07 million shares. In the past 52-week period, the stock has been trading in a range of $27.74 to $45.50.