Abercrombie & Fitch To Close All Ruehl Stores; Amends Credit Agreement - Update

Casual sportswear apparel retailer Abercrombie & Fitch (ANF) announced Wednesday that it would shut down all of its 29 Ruehl branded stores and related direct-to-consumer operations by the end of the current fiscal year. The company also said that it has amended its credit agreement to exclude charges related to Ruehl closures from calculation of certain ratios.

The company said that Ruehl generated a pre-tax operating loss of about $58 million for the fiscal year ended January 31, 2009, including an impairment charge of about $22 million amid the global slump leading to its Board of Directors approving the closure of the 29 Ruehl stores.

Abercrombie & Fitch said that it incurred about $51 million pre-tax impairment charges in the first quarter due to the strategic review of the Ruehl operations and expects to incur additional charges of about $65 million following the closure of the stores.

The company estimates the net cash outflow associated with the Ruehl store and direct-to-consumer closings to be $75 million.

The company also announced the amendment of its existing credit agreement effective June 16, allowing it to exclude from its calculation of the minimum coverage and maximum leverage ratios up to $61 million of the estimated $65 million of additional charges associated with exiting Ruehl. In addition, the required minimum coverage ratio will be reduced through the end of the 2010 fiscal year, the company said.

In connection with these changes, Abercrombie & Fitch agreed to a reduction in the amount of available credit to $350 million from $450 million, an increase in the facility fee and borrowing costs, and a capital expenditure limit of $600 million for the 2009 and 2010 fiscal years, including not more than $275 million for fiscal 2009.

ANF is currently trading at $26.65, up $0.85 or 3.29%, on the NYSE.

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