Abercrombie & Fitch Co. Stock Jumps On Earnings Beat


Abercrombie & Fitch Co. (NYSE:ANF) shares are up more than 5% in trading today after the company released better than expected earnings for the first fiscal quarter. The stock initially jumped more than 7% following the news, but now seems to be stabilizing around $37.

Abercrombie & Fitch Co. (NYSE:ANF) had $822 million in revenue, down 2% from last year but ahead of the consensus $804.5 million, and a net loss of $13 million or $0.17 per share compared to an expected loss of $0.19 per share, reports Maggie McGrath at Forbes. The retailer maintained guidance for full year diluted EPS between $2.15 and $2.35 with capital expenditures between $210 million and $220 million.

Retail recovering from bad weather, heavy promotions

The US retail sector dragged at the beginning of this year due to a combination of bad weather keeping customers away and a tough promotional sales environment with a high mix of clearances and sales. Now that both of those trends are starting to give way, retail has a chance to recover. There had already been signs that Abercrombie would be one of the big winners this season as it had been improving inventory more quickly than other softlines. But even with the sequential improvement, the gross profit rate fell 370 bp from 1Q13 to 62.2% as promotions are still higher than they were last year.

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“In what remains a difficult teen retail environment, we are pleased that earnings for the quarter were in line with our expectations,” said Abercrombie & Fitch Co. (NYSE:ANF) CEO Mike Jeffries. “Comparable sales continued to head in the right direction, and included significant sequential improvement in our female business and our Abercrombie & Fitch brand as a whole.”

Abercrombie & Fitch continues to cut costs

Abercrombie & Fitch Co.’s (NYSE:ANF) stores and distribution expense fell to $417.6 million from $449.1 million a year ago, pushing the expense rate to 50.8% of net sales. The 270 basis point drop was driven by lower payroll costs as director-to-customer sales picked up (and partially offset those savings). Marketing, general, and administrative costs were up 4% over last year, but this was almost entirely due to non-recurring costs from corporate governance issues ($6.9 million) and a profit improvement initiative ($2.3 million). If you exclude those two items then marketing, general, and administrative costs fell 4% year on year to $114.4 million for the quarter.

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