Casual apparel retailer Abercrombie & Fitch Co. (ANF) on Tuesday reported a decline in fourth quarter net profit, hurt primarily by a 13% drop in comparable store sales and higher store related impairment charges. The board also declared a cash dividend for the quarter. Meanwhile, the shares of Abercrombie & Fitch are currently trading up more than 7% on the NYSE.
For the fourth quarter, the New Albany, Ohio-based company's net earnings were $47.46 million or $0.53 per share as compared with $68.41 million or $0.78 per share in the prior-year period.
On an adjusted basis, net income was $0.91 per share versus $1.06 per share in the previous-year quarter. Adjusted results exclude loss from discontinued operations and non-cash asset impairment charges.
Net income from continuing operations slumped to $61.03 million or $0.68 per share from $88.02 million or $1.00 per share a year earlier.
Abercrombie & Fitch noted that its results included non-cash, store-related asset impairment charges of $0.23 per share in the current quarter as compared to $0.06 per share last year, and a charge of $0.11 per share with regard to expense in connection with IRC Section 162(m).
On average, 35 analysts polled by Thomson Reuters expected the company to earn $0.87 per share for the quarter. Analysts' estimates typically exclude special items.
Abercrombie & Fitch's loss from discontinued operations narrowed to $13.57 million or $0.15 per share from $19.61 million or $0.22 per share in the same quarter last year. Discontinued operations for the period include operating results, exit charges and non-cash impairment costs associated with Ruehl. The company completed the closure of 29 Ruehl branded stores and related direct-to-consumer operations during the quarter.
Net sales for the 13-week period, which includes direct-to-consumer net sales, dropped 5% to $935.99 million from $980.81 million in the fourth quarter of the previous year. Including direct-to-consumer net sales, total domestic net sales for the quarter decreased 12% to $793.1 million, while total international net sales grew 86% to $142.9 million. Analysts expected Abercrombie & Fitch to generate revenues of $953.65 million for the quarter.
The company's comparable store sales for the fourth quarter declined 13%. Previously, in November and December, Abercrombie & Fitch had reported depressing comparative store sales figures, but January turned out better for the retailer.
Segment-wise, comparable store sales for Abercrombie & Fitch division decreased 8%, abercrombie kids comparable store sales were down 11%, and Hollister Co. comparable store sales for the quarter dropped 19%.
Quarterly gross profit rate was 63.5%, a decline of 110 basis points from the prior-year quarter, reflecting lower average unit retail, partially offset by a reduction in average unit cost. The decline in gross profit rate also reflects unplanned markdowns on spring product that will go straight to clearance or outlet stores.
During the three-month period, total stores and distribution expenses rose to $413.98 million from $385.02 million last year, while total marketing, general and administrative costs were $92.39 million versus $97.46 million in the comparable period prior year.
In the preceding third quarter, Abercrombie & Fitch's third quarter net income was down to $38.78 million or $0.44 per share from $63.90 million or $0.72 per share in the year-ago quarter, and net sales fell 15% to $765.40 million from $896.34 million in the third quarter of fiscal 2008.
For fiscal 2009, the company's net earnings plunged to $0.25 million from $272.26 million in the year-earlier quarter. On a per-share basis, earnings were breakeven as compared with $3.05 per share last year. Adjusted net profit was $1.12 per share as compared with $3.51 per share in the previous year.
Net earnings from continuing operations were $78.95 million or $0.89 per share as compared with $308.17 million or $3.45 per share in the comparable period last year. Abercrombie & Fitch's loss from discontinued operations widened to $78.70 million or $0.89 per share from a loss of $35.91 million or $0.40 per share in the last-year period.
Full year net sales decreased 16% to $2.93 billion from $3.48 billion in fiscal 2008, with a 23% decline in comparable store sales. Analysts excepted the company to earn $0.90 per share on revenues of $2.98 billion for the year.
During the year, Abercrombie & Fitch opened 24 new stores, 11 domestically and 13 internationally, and closed 53 stores, including 29 Ruehl stores, and during the fourth quarter of fiscal 2009, the company opened a flagship location in Tokyo, as well as five Hollister mall-based stores in Europe.
Looking ahead to fiscal 2010, Abercrombie & Fitch plans to open Abercrombie & Fitch flagship stores in Copenhagen, Denmark and Fukuoka, Japan and a Hollister Epic store on Fifth Avenue in New York. The company also intends to open about 30 international mall-based Hollister stores in the 2010-year period.
Based on current new store plans and other planned expenditures, the company estimates total capital expenditures to be between $250 million and $260 million, including $215 million to $225 million with regard to new stores, store refreshes and remodels, and nearly $35 million in connection with IT, distribution center and other home office projects.
Going forward, chief executive officer and chairman Mike Jeffries said, "--, we look forward to 2010 as we intend to grow the business internationally and improve the profitability of the domestic business."
In addition, the board has declared a quarterly cash dividend of $0.18 per share on the company's Class A common stock, payable on March 16, 2010 to shareholders of record at the close of business on February 26, 2010.
Among peers, American Eagle Outfitters, Inc. (AEO) is scheduled to report fourth-quarter results before the market opens on March 10. Analysts expect earnings of $0.33 per share on revenues of $962.21 million.
Another competitor, Gap Inc. (GPS) is expected to report earnings of $0.49 per share, on revenues of $4.22 billion, when it reports fourth-quarter results on February 25.
ANF is currently trading on the New York Stock Exchange at $35.35 per share, up $2.35 or 7.12%, on a volume of 4.92 million shares. In the past 52-week period, the stock has been trading in a range of $16.95 to $42.31.
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