Abercrombie & Fitch shutters Ruehl stores

In a move that surprised nobody, Abercrombie & Fitch (ANF) today announced plans to shutter its struggling 29-store Ruehl chain by the end of the year.

Perhaps the chain's offerings were out of step with the times. Ruehl sought to define "the aspirational Greenwich Village lifestyle" with high-priced "signature styles" of clothing. The names of its products invoked a trendy kind of sophistication that the New York City neighborhood is known for; "One Night Stand," "Buying Drinks" and "Chance Encounter" pocketbooks went for $298, while jeans sold for $118 and a pair of leather flip-flops fetched $50.

Ruehl generated a pre-tax operating loss of about $58 million for the fiscal year ended January 31, 2009, including a non-cash impairment charge of approximately $22 million. In a statement, Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said he was disappointed that the chain was closing.

"It has been a difficult decision to close Ruehl, a brand we continue to believe could have been successful in different circumstances," Jeffries said in a press release.

Wall Street criticized Abercrombie & Fitch for taking so long to close Ruehl. Abercrombie took a $51 million impairment charge related to Ruehl in the first quarter and will have to charge off an additional $65 million over the rest of the year. Same-store sales at Ruehl fell 33 percent in May alone.

The company also announced that it has amended its existing credit agreement to exclude from its calculation of the minimum coverage and maximum leverage ratios up to $61 million of the estimated $65 million of additional pre-tax charges associated with exiting Ruehl. Abercrombie & Fitch also 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.
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