Casual apparel retailer Abercrombie & Fitch Co. (ANF) reported Friday a decline in profit for the third quarter, hurt by sharp decline in comparable store sales, despite a one-time benefit. On a non-GAAP basis, quarterly earnings per share declined from last year, yet topped market projections, with net sales, despite a fall, also beating Wall Street view. The company now said it continues to anticipate to complete the closure of Ruehl stores, by fiscal year-end.
The New Albany, Ohio-based company's third-quarter net income was $38.78 million or $0.44 per share, significantly lower than prior year's net income of $63.90 million or $0.72 per share in the year ago quarter.
The latest quarter results included charges of $6.2 million associated with the closure of the Ruehl business, offset by an $18.6 million benefit associated with a true up of the year-to-date tax rate.
On a non-GAAP basis, excluding items, the company's third-quarter net income was $26.33 million or $0.30 per share. On average, 34 analysts polled by Thomson Reuters expected the company to report earnings of $0.20 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter decreased 15% to $765.40 million from $896.34 million in the year ago, yet beat twenty five Wall Street analysts' consensus revenue estimate of $764.53 million. The company's third-quarter comparable store sales decreased 22%.
In the quarter, direct-to-consumer net sales increased 11% year-over-year to $63.9 million. Abercrombie & Fitch segment recorded net sales of $324.3 million, abercrombie kids' net sales were $90.8 million, Hollister Co. net sales were $333.4 million, and Ruehl's net sales were $11.72 million, compared to last year's $13.53 million.
Comparable store sales for Abercrombie & Fitch segment decreased 18%, and the decline was 22% for abercrombie kids. Hollister Co. comparable store sales fell 26% in the quarter, and Ruehl comparable store sales decreased 30%.
Gross profit for the quarter declined to $486.93 million from last year's $591.94 million, and gross margin fell 240 basis points to 63.6% from 66% a year earlier. The company attributed the decline in gross profit rate mainly to a lower average unit retail, partially off-set by a reduction in average unit cost and a benefit from other gross margin items. Operating income was $30.35 million or 4% of total net sales, compared to $100.14 million or 11.2% of total net sales a year ago.
Commenting on the results, Mike Jeffries, chief executive officer and chairman, said, "During the quarter, we made advances in our international strategy with the opening of a flagship location in Italy as well as additional Hollister mall-based stores in the United Kingdom. The passion and enthusiasm from the international customer that greeted us at these openings encourage us in our long-term strategy of aggressively pursuing international growth for our brands."
As of the end of the third quarter, the company operated 347 Abercrombie & Fitch stores, 209 abercrombie kids stores, 509 Hollister Co. stores, 27 Ruehl stores and 16 Gilly Hicks stores in the United States. The company also operated stores in Canada, United Kingdom and Italy.
In its preceding second quarter, Abercrombie & Fitch had posted a net loss of $26.7 million or $0.30 per share, compared to a profit of $77.8 million or $0.87 per share last year, reflecting declining sales and charges related to the closure of Ruehl operations. Net sales declined 5% to $657.60 million and comparable store sales were down 10%, compared to a 9% decline last year.
Among others in the sector, Gap Inc. (GPS) is slated to announce its third-quarter results on Thursday, November 19. Most recently, Gap reported third-quarter net sales of $3.59 billion, up 1% from $3.56 billion a year ago. Wall Street analysts forecast earnings of $0.44 per share for the quarter, with estimates ranging between $0.42 and $0.45 per share. The company earned $0.35 per share in the year-ago period.
Specialty retailer Urban Outfitters Inc. (URBN) Thursday posted third-quarter net income of $62.4 million or $0.36 per share, up from $59.3 million or $0.35 per share last year, as sales grew helped by better performance at its Anthropologie stores. The Philadelphia, Pennsylvania-based company's net sales advanced 6% to $505.9 million, and comparable retail segment net sales, which include Direct-to-consumer channels, rose 2%. Comparable store net sales declined 2%.
Teen clothing retailer American Eagle Outfitters, Inc. (AEO) is slated to release its third-quarter earnings on Tuesday, November 24. The Pittsburgh, Pennsylvania-based company expects earnings in the range of $0.27 to $0.28 per share, and adjusted earnings in the range of $0.20 to $0.21 per share. Analysts expect the company to earn $0.21 per share for the quarter, with estimates ranging between $0.20 and $0.28 per share.
American Eagle Outfitters recently reported that its third-quarter total sales edged down 1% to $749 million from $754 million in the year ago quarter. Comparable store sales for the quarter decreased 4%, compared to a 7% decline in the same period last year.
For the nine months of fiscal 2009, Abercrombie & Fitch reported a net loss of $47.20 million or $0.54 per share, compared to prior year's net income of $203.85 million or $2.27 per share. Non-GAAP net income for the period was $4.80 million or $0.05 per share. Nine-month net sales fell to $2.03 billion from last year's $2.54 billion.
Further, the company said its Board of Directors declared a quarterly cash dividend of $0.175 per share on the Class A Common Stock of Abercrombie & Fitch Co., payable on December 15, 2009 to shareholders of record at the close of business on November 27, 2009.
Looking ahead, Abercrombie & Fitch continues to expect total capital expenditures for fiscal 2009 to be approximately $185 million, including about $45 million related to information technology, distribution center and other home office projects, a substantial portion of which relates to systems to support the company's international roll-out.
The company added that it remains on track to open an Abercrombie & Fitch flagship store in Tokyo in December as well as an additional five Hollister mall-based stores in Europe during the fourth quarter bringing the total European Hollister store count to 12.
In fiscal 2010, the company targets to open Abercrombie & Fitch flagship stores in Copenhagen, Denmark and Fukuoka in Japan. Additionally, the company will open a Hollister Epic on Fifth Avenue in New York where it had previously been planning to open an abercrombie kids flagship.
Regarding the closure of Ruehl stores, Abercrombie & Fitch now said it continues to anticipate that the closure will be complete by the end of the current fiscal year. It was on June 16, 2009 that the company's Board approved the closure of its 29 Ruehl branded stores and related direct-to-consumer operations.
The company now projects aggregate pre-tax charges with a net present value of approximately $60 million to exit the Ruehl business, in comparison with prior estimate of $65 million. The Company incurred $10.1 million in the third quarter and $23.6 million in the second quarter, and the remaining charges are expected to be substantially recognized during the fourth quarter.
In a November 9 research note, Credit Suisse has upgraded Abercrombie & Fitch shares to "Outperform" from "Neutral" and increased its price target to $49 from $30. Analyst Lejuez upgraded the stock based on higher than anticipated flagship and international Hollister stores' revenue/margin contribution.
ANF is currently trading at $39.15 in the pre-market activity, up $2.39 or 6.50%.
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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.