Abercrombie Falls as Third-Quarter Sales Trail Estimates
Abercrombie & Fitch Co. (ANF) fell the most in more than two months after posting fiscal third-quarter sales that trailed analysts’ estimates as teens restrained spending on clothing.
The stock dropped 14 percent to $33.13 at the close in New York for the biggest decline since Aug. 22. Shares of New Albany, Ohio-based Abercrombie have retreated 31 percent this year, compared with a 24 percent gain for the Standard & Poor’s 500 Index.
Comparable-store sales fell 14 percent in the quarter ended Nov. 2, the company said in a statement yesterday. Analysts on average estimated a 13 percent decline, according to projections compiled by Bloomberg. Net sales slid 12 percent to $1.03 billion, missing the average estimate of $1.07 billion.
Chief Executive Officer Mike Jeffries has been struggling to reconnect with the chain’s teenage customers who have become less enamored of its fashions, half-naked models and noisy stores. Consumers are also limiting purchases of non-essential items amid uncertainty in the economy. Full-year earnings will be as much as $1.50 a share on an adjusted basis, excluding charges, Abercrombie said, below the $1.97 estimate of analysts.
The projection “throws out any hope that the holiday season can bail them out,” Dorothy Lakner, a New York-based analyst at Topeka Capital Markets, said in an interview. “There was still some expectation that we’d seen the worst and things were going to get better,” said Lakner, who has a hold rating on the shares.
Abercrombie also said it plans to close all standalone stores of its Gilly Hicks lingerie brand by the end of the first quarter of the next financial year. The closings will result in pretax charges of about $90 million to $100 million, the company said. Abercrombie operates 20 Gilly Hicks stores in the U.S. and eight internationally, according to an Aug. 22 statement.
The company said adjusted third-quarter profit, excluding charges, will be at the higher end of its prior guidance of 40 cents a share to 45 cents a share. Analysts estimate 40 cents on average. Abercrombie will release full third-quarter results on Nov. 21.
“Our objective is to get stabilization of comparable sales in next 12 to 18 months,” Chief Financial Officer Jonathan Ramsden said in a phone interview. “The environment is difficult. It’s an open question as to whether what’s transpired since back-to-school is a reset, or is it just a temporary phenomenon caused by factors that are going to abate over time.”
Abercrombie will continue to close underperforming stores in all of its brands at a pace of about 40 per year, according to a presentation to analysts today. The company will expand its product assortment online, including its offering of third-party collaborations. The retailer is also redesigning Hollister storefronts, replacing porches and shutters with glass windows and video screens.
Gilly Hicks, described by the company as the “cheeky cousin” of Abercrombie, was developed to sell underwear and pajamas to girls and women ages 14 to 35. Abercrombie said it will continue to sell Gilly Hicks apparel through the brand’s website and in its Hollister stores.
Jeffries, whose contract expires in February 2014, said the company has a lot of talent from which to select a successor. He didn’t comment on the contract negotiations.
“I expect to be here,” Jeffries, 69, said at the meeting with analysts. “I’m totally energized by our opportunities.”
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