Abercrombie & Fitch Co. (ANF) Shares Nosedive On Weak Earnings


Abercrombie & Fitch Co. (NYSE:ANF) greatly missed earnings expectations when it released its latest quarterly results this morning. The apparel retailer also issued very weak guidance, and as a result, the company’s shares fell as much as 18 percent in Thursday morning trading.

Abercrombie’s latest results

The retailer reported a 33 percent decline in profits for the most recently completed quarter, even missing its own guidance. Sales in the U.S. were especially weak, and the company cited “weaker traffic and continued softness in the female business, consistent with what others have reported.”

Abercrombie & Fitch Co. (NYSE:ANF) reported profits of $11.4 million or 14 cents per share for the quarter which ended Aug. 3. That’s compared to profits of $17.1 million or 20 cents per share in the same quarter a year ago. In May, the apparel company guided for August quarter earnings of 28 to 33 cents per share.

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Gross margins did increase slightly from 62.3 percent last year to 63.9 percent this year as the company reduced its input costs by 4.8 percent. Sales fell .6 percent to $945.7 million. That’s compared to consensus estimates of $996.2 million for the quarter.

Abercrombie issues cautious guidance

The company’s guidance for the current quarter was especially cautious. It expects to see earnings of between 40 and 45 cents per share with same-store sales down a little more than 10 percent, which is the rate at which they declined during the second quarter. Consensus estimates from analysts polled by Thomson Reuters indicate that they were expecting earnings of $1.06 per share for the current quarter.

Abercrombie and the competition

Anna Prior of The Wall Street Journal suggests that the biggest problem for Abercrombie & Fitch Co. (NYSE:ANF) may be that it didn’t warn investors earlier this year, like its competitors American Eagle Outfitters (NYSE:AEO) and Aeropostale Inc (NYSE:ARO) did.

Abercrombie has been struggling to make its brand more relevant to teens and young adults. Sales in the U.S. and abroad have been weak, and the company has had to offer significant markdowns and deal with inventory problems. The company has even begun closing stores in the U.S. in an attempt to improve its margins. It has also begun to control its inventory more carefully, which the company said should result in higher prices even if the number of sales is lower.

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