Casual apparel retailer Abercrombie & Fitch Co. (ANF) Wednesday said its profit in the first quarter plunged from last year amid higher costs in a weak European environment. The company still confirmed its full year earnings outlook.
Mike Jeffries, CEO, said, "While we are disappointed that European sales trends remain challenging in a very difficult macroeconomic environment, we are largely satisfied with our overall performance for the quarter in that context...With cotton cost issues now largely behind us, we look forward to strong year over year earnings growth in the back half of the year."
Net income dropped to $3 million or $0.03 per share from $25.14 million or $0.28 per share a year ago.
On average, 32 analysts polled by Thomson Reuters expected the company to report earnings of $0.02 per share. Analysts' estimates typically exclude special items.
Net sales grew to $921.22 million from $836.67 million in the prior-year quarter. Analysts expected revenues of $951.37 million.
Gross margin declined 240 basis points to 62.6 percent, driven by a significant increase in average unit cost.
Total comparable store sales for the quarter decreased 5 percent with a 4 percent drop for Abercrombie & Fitch brand, 11 percent decline for abercrombie kids and a 5 percent decrease for Hollister Co.
U.S. sales, including direct-to-consumer sales, edged up 1 percent to $644.3 million while International sales, including direct-to-consumer sales, increased 42 percent to $277.0 million.
Stores and distribution expense increased over 14 percent, as a result of higher direct-to-consumer costs, store payroll and store management costs.
Looking ahead, the company maintained its 2012 earnings per share forecast of $3.50 to $3.75. The retailer expects same store sales to be down by a mid-single digit percentage on a full-year basis.
ANF's plans to international Abercrombie & Fitch flagship locations in Hong Kong, Munich, Dublin and Amsterdam in 2012 remain unchanged. The company continues to expect to open around 40 international Hollister stores throughout the year.
The Board of Directors declared a quarterly cash dividend of $0.175 per share on Tuesday. Additionally, the Board increased the existing share repurchase authorization by ten million shares. This brings the shares available for purchase under the firm's share repurchase authorization to 12.9 million shares.
ANF, which closed at $45.40 on Tuesday, is dropping 6.7 percent in pre-market activity.
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