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Aug 30, 2016
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Abercrombie & Fitch sales fall for 14th straight quarter

By
Reuters
Published
Aug 30, 2016

Teen apparel retailer Abercrombie & Fitch Co posted a bigger-than-expected loss for the second quarter as efforts to win back shoppers through store remodeling and other measures failed to boost sales and are not expected to do so for the rest of the year.


Abercrombie & Fitch


The retailer's about-turn from a forecast issued in May, when it said it expected results to improve in the second half of the year, sent its shares tumbling more than 14 percent in premarket trading on Tuesday.

Abercrombie's sales dropped for the 14th straight quarter and comparable sales fell a slightly steeper-than-expected 4 percent, mainly due to lower traffic, including from tourists, at its flagship stores.

"Comparable sales (will) remain challenging through the second half of the year, with a disproportionate effect from flagship and tourist locations," the company said.

Abercrombie, like other teen apparel retailers, has posted a string of sales declines as it struggled to compete with the trendier and often cheaper products at fast-fashion retailers such as H&M and Inditex's Zara.

To win back shoppers, Abercrombie is investing heavily in remodeling its Hollister stores, has hired designers from top brands to keep up with trends and shifted away from the logo-centric designs that was once a big draw.

Abercrombie said its cost of sales dipped 0.6 percent, stores and distribution expenses dropped 1.6 percent, while marketing, general and administrative expenses fell 7.3 percent in the quarter ended July 30.

But, that was not enough to offset a 4.2 percent decline in net sales.

The company said its second quarter gross margin dropped 140 basis points to 60.9 percent, is expected to fall in the current quarter as well, and ending up at 61.9 percent in fiscal 2016, flat year-over-year.

Net loss attributable to Abercrombie increased to $13.1 million from $810,000 in the latest quarter.

Excluding items, it lost 25 cents per share, bigger than analysts average estimate of 20 cents, according to Thomson Reuters I/B/E/S.

Net sales fell to $783.2 million from $817.8 million, but was slightly above the $782.7 million analysts were expecting.

Abercrombie reported strong growth in its direct-to-consumer business and a recovery in comparable sales in Hollister's European business, including in the UK.

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