Specialty retailer of apparels Abercrombie & Fitch Co. (ANF) said Friday morning that profit for the second quarter declined 4% from last year on one-time charges and a 4% decline in comparable store sales. Earnings per share edge down 1%, yet topped analysts' consensus by a penny, while quarterly sales increased 5%, but missed analysts' estimate. Further, the company provided earnings forecast for fiscal 2008 and also declared a quarterly cash dividend.
The New Albany, Ohio-based Abercrombie & Fitch reported second-quarter net income of $77.83 million, 4% lower than $81.28 million in the prior-year quarter.
On a per share basis, earnings edged down 1% to $0.87 from $0.88 in the year-ago quarter, yet topped the average estimate of twenty-two analysts polled by First Call/Thomson Financial of $0.86 per share for the second quarter by a penny.
Results for the latest quarter include $0.01 per share related to charges associated with the departure of a senior executive.
Net sales for the quarter increased 5% to $845.80 million from $804.54 million in the same quarter last year, but missed nineteen Wall Street analysts' consensus estimate of $851.40 million for the second quarter, with estimates ranging from $838.30 million to $903.90 million.
Comparable store sales for the quarter decreased 4%. May comparable store sales edged down 1%, while June comparable store sales decreased 3%, and comparable store sales for July declined 7%.
Among competitors, on Thursday Urban Outfitters, Inc. (URBN) reported a 78.8% surge in its profit for the second quarter, boosted by a strong 30% growth in net sales and comparable store sales increase of 10%. The company's quarterly earnings per share and net sales came in above market projections.
Another peer, San Francisco, California based Gap Inc. (GPS) will report its second-quarter results on Thursday, August 21. The company expects earnings per share for the second quarter 2008 between $0.30 and $0.31. Analysts estimate earnings to be $0.30 per share for the quarter, with expectations between $0.22 and 0.32 per share.
Segmental Details
The company's total direct-to-consumer net sales climbed 23% year-over-year to $55.9 million.
Among divisions, Abercrombie & Fitch division net sales increased 5% to $383.6 million from the year-ago quarter, and comparable store sales rose 3%. Net sales for abercrombie division were flat with the prior-year quarter at $94.8 million, while its comparable store sales decreased 11%.
Hollister Co. division net sales totaled $350.8 million, a 5% increase year-over-year, while comparable store sales declined 9%. Net sales for RUEHL division grew 7% to $12.5 million, while its comparable store sales fell 22%.
Other Metrics
Operating income for the latest quarter marginally declined to $123.98 million, while as a percentage of sales, operating margin declined 0.7 percentage point to 14.9% from the prior-year quarter.
Gross profit for the second quarter was $592.97 million, up from $553.44 million in the year-ago quarter, while gross margin percentage increased 1.3 percentage points to 70.1% from last year, primarily due to a higher initial markup rate.
Total stores and distribution expense, as a percentage of sales, increased 1 percentage point to 42.6%, while marketing, general and administrative expense, as a percentage of sales, increased 0.7 percentage point to 12.9% from the comparable quarter a year ago.
The increase in expenses were due to the company's inability to leverage fixed expenses due to the comparable store sales decline as well as additional expense needed to execute its international expansion plans and charges associated with the departure of a senior executive.
Abercrombie & Fitch's Board of Directors also declared a quarterly cash dividend of $0.175 per share on its Class A Common Stock, payable on September 16 to shareholders of record at the close of business on August 29, 2008.
At the end of the second quarter, the company operates 353 Abercrombie & Fitch stores, 209 abercrombie stores, 479 Hollister Co. stores, 25 RUEHL stores and eight Gilly Hicks stores in the United States. The Company also operated three Abercrombie & Fitch stores and three Hollister Co. stores in Canada, and one Abercrombie & Fitch store in London, England. Additionally, the company operates four e-commerce websites.
Commenting on the results, chief executive officer Mike Jeffries said, "Our second quarter financial results reflect difficult macroeconomic conditions and a significant slowdown in consumer spending. However, we see these challenging times as a great opportunity to place more distance between us and the rest of specialty retail."
Half-Yearly Highlights
For the first six months, Abercrombie & Fitch reported net income of $139.95 million, marginally lower than $141.36 million in the prior-year period. On a per share basis, earnings grew to $1.55 from $1.53 in the year-ago period.
Net sales for the six-month period increased to $1.65 billion from $1.55 billion in the same period last year.
Guidance
Looking ahead to the second-half of fiscal 2008, Abercrombie & Fitch expects net income in a range of $3.40 to $3.45 per share.
For fiscal 2008, the company currently anticipates full-year net income in a range of $4.95 to $5.00 per share. The low end of the guidance reflects a negative 7% comparable store sales scenario. Street expects the company to report full-year earnings of $5.36 per share, with estimates in a range of $5.20 to $5.65 per share.
Stock Quote
In Friday's regular trading session, ANF is trading at $53.10, up $0.53 or 1.01% on a volume of 3.58 million shares. In the past 52-week period, the stock has been trading in a range of $48.21 to $85.77.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.