Abercrombie & Fitch Falls Out of Fashion in Q3

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There was no strutting down the runway this quarter for teen retailer Abercrombie & Fitch , which reported disappointing third-quarter earnings results before the opening bell.

For the quarter, Abercrombie & Fitch - which also owns Hollister - reported a 12% decline in sales to $1.033 billion from $1.17 billion in the year-ago period as it reported a GAAP loss of $0.20 per share, dragged down primarily by a one-time charge to close its Gilly Hicks stores. When this one-time cost is removed, Abercrombie & Fitch delivered EPS of $0.52, which was modestly ahead of Wall Street's expectations.

Despite the adjusted earnings beat, there wasn't much to cheer about. Same-store sales, which is a truer measure of retail performance as it strips out the addition of new locations, fell a whopping 14% overall, highlighted by a 14% drop in the U.S. and a 15% drop in its international markets. The one bright spot was Abercrombie's direct-to-consumer (i.e., online and catalog) comparable-store sales, which rose 11% year-over-year.

By brand it was much the same story, with comparable-store sales for Abercrombie & Fitch and Hollister falling 13% and 16%, respectively (Hollister sales make up 52% of A&F's total revenue), while Abercrombie Kids saw a smaller decline of just 4%.

Looking ahead, Abercrombie & Fitch is forecasting a low double-digit same-store sales decline in the fourth quarter and offering up full-year EPS guidance of $1.40-$1.50. The outlook also "assumes significant gross margin rate erosion in the fourth quarter with gross margin rate approximately flat year over year on a full year basis." In other words, expect big discounts to drive merchandise off the shelves this holiday season.


The article Abercrombie & Fitch Falls Out of Fashion in Q3 originally appeared on Fool.com.

Fool contributor  Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle  @TMFUltraLong . Try any of our Foolish newsletter services free for 30 days . We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights  makes us better investors. The Motley Fool has a disclosure policy .

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