Casual apparel retailer Abercrombie & Fitch Co. (ANF) reported a sharp decline in fourth-quarter profit, as it saw flat sales in stores in operation for at least one year. The impact was exacerbated by a more aggressive promotional environment that squeezed margins. The results managed to meet Wall Street projections, but missed the management's expectations.
The retailer's gross profit margin fell a whopping 750 basis points reflecting higher unit costs, lower than expected sales and higher markdowns.
Total comparable store sales were flat as a 2 percent growth in Hollister Co. brand was more than offset by lower results at Abercrombie & Fitch and abercrombie kids brands.
Meanwhile, net sales grew 16 percent to $1.33 billion in the quarter, meeting analysts' expectations, helped by a 4 percent increase in U.S. sales and a 62 percent surge in international sales - both including strong growth in direct-to-consumer sales.
For the fourth quarter, net income plunged to $19.58 million or $0.22 per share from last year's $92.59 million or $1.03 per share.
Excluding one-time charges, net income was $1.12 for the quarter, lower than last year's $1.38 per share, but was in line with the average estimate of 35 analysts polled by Thomson Reuters. Such estimates typically exclude special items.
Looking ahead, the company expects fiscal year 2012 earnings to beat Street estimates. It projects earnings per share in the range of $3.50 to $3.75, while analysts expect $3.47 a share.
"..we are on track with our long term strategy of leveraging the international appeal of our iconic brands to build a highly profitable, sustainable, global business. The overall economics of our business in Europe, in our U.S. tourist stores and in our DTC business remain very strong," the company's Chief Executive Officer Mike Jeffries said in a statement.
On Tuesday, the Board of Directors declared a quarterly cash dividend of $0.175 per share, payable on March 13 to shareholders of record on February 27.
ANF shares are currently trading at $43.90 in pre-market activity, down $0.69 or 1.55 percent.
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