Abercrombie & Fitch posts smaller 1st-quarter loss as sales climb in US and abroad

Tuesday, May 18, 2010

Abercrombie & Fitch loses less in 1Q as sales rise

NEW ALBANY, OHIO — Abercrombie & Fitch Co. narrowed its loss in the first quarter as its sales improved in the U.S. and overseas, but it made less money on some sales and was hurt by higher expenses.

The company said Tuesday it is speeding its international expansion, eyeing new opportunities in Europe and Asia, where CEO Mike Jeffries said its stores are “most productive.” International sales more than doubled in the quarter, while domestic sales rose 5 percent.

During the recession, Abercrombie’s U.S. customers cut their spending the most as they focused on essentials. But the company has made its products trendier and lowered its prices, which can be a gamble because it cuts into profit margins.

Jeffries said the company still has work to do.

“Promotion isn’t a fundamental strength of ours but we’re getting much, much smarter in Hollister in terms of what we promote, how we promote it, where we promote it,” he said.

He said the company will continue to offer sales and other deals at Hollister, which has a sportier vibe, while it will promote less at higher-priced Abercrombie & Fitch and Abercrombie.

This fiscal year, the company plans to open flagship stores in Copenhagen, Denmark, and Fukuoka, Japan, a Hollister Epic store in New York, about 25 Hollister stores in malls in other countries, one Abercrombie & Fitch store in Canada and a Gilly Hicks store in the U.K. In the U.S., the company also expects to open three Abercrombie & Fitch stores, two abercrombie kids stores, three Hollister stores, two Gilly Hicks stores and five outlet stores.

The company’s U.S sales hit $568.8 million for the quarter, while international sales were $119 million. Both domestic and international results include online and other direct-to-consumer sales.

Based in New Albany, Ohio, Abercrombie posted a loss of $11.8 million, or 13 cents per share, for the period that ended May 1. It lost $59.2 million, or 68 cents per share, a year earlier.

The performance met the expectations of analysts polled by Thomson Reuters, who typically exclude one-time items.

Revenue rose 14 percent to $687.8 million, topping Wall Street’s expectation of $680.5 million.

Shares fell $1.02 to $39.76 in late morning trading Tuesday.

Revenue at stores open at least a year edged up 1 percent, helped by increases at both abercrombie kids and the company’s namesake stores. Hollister Co.’s figure dipped 2 percent. Revenue at stores open at least a year is a key indicator of a retailer’s health because it measures results at existing stores rather than newly opened ones.

Gross profit slipped to 62.7 percent of revenue, from 63.4 percent a year earlier.

Abercrombie’s marketing, general and administrative expenses climbed 12 percent to $96.6 million.

The company announced a quarterly cash dividend of 17.5 cents to be paid June 15 to shareholders of record as of May 28.

Abercrombie & Fitch had 1,100 stores at the end of April.

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