Abercrombie & Fitch reports rise in Q3 net income

Abercrombie & Fitch reported GAAP net income per diluted share of 0.60 dollar for the thirteen weeks ended October 31, 2015, compared to GAAP net income per diluted share of 0.25 dollar for the thirteen weeks ended November 1, 2014. Excluding certain items, the company reported adjusted non-GAAP net income per diluted share of 0.48 dollar for the third quarter, compared to adjusted non-GAAP net income per diluted share of 0.42 dollar for the third quarter last year.

“Our third quarter results exceeded our expectations coming into the quarter and provide the strongest validation yet that our initiatives are working. We saw continued sequential improvement in comparable sales, led by positive comparable sales for our Hollister brand and across our international business. As we look ahead in the fourth quarter, there are mixed signals in the sector and we remain cautious; however, we are confident that the work we are doing is laying the foundation for long-term profitability and growth,” said Arthur Martinez, Executive Chairman of the company.

Third quarter sales results

Net sales for the third quarter, at 878.6 million dollars, were approximately flat on a constant currency basis, but down 4 percent on a reported basis over the same period a year ago. Comparable sales decreased 1 percent. On a sequential basis, comparable sales trends improved across all brands and geographies.

By brand, net sales decreased 6 percent to 411.3 million dollars for Abercrombie and were approximately flat at 467.3 million dollars for Hollister. By geography, net sales decreased 4 percent to 572.7 million dollars in the US and decreased 3 percent to 305.8 million dollars internationally. Direct-to-consumer and omni-channel sales comprised approximately 21 percent of total company net sales for the quarter and grew in both the US and internationally on a constant currency basis over last year.

Gross profit for the quarter improves

The gross profit rate for the third quarter was 63.7 percent. Excluding certain items, the adjusted gross profit rate for the third quarter was 63.4 percent, reflecting an improvement of 120 basis points on a reported basis and 210 basis points on a constant currency basis over last year, primarily due to higher average unit retails coupled with lower average unit cost. During the quarter, the company opened 13 new stores and closed two stores.

On November 18, 2015, the Board of Directors declared a quarterly cash dividend of 0.20 dollar per share on the Class A Common Stock of Abercrombie & Fitch, payable on December 9, 2015 to stockholders of record at the close of business on December 1, 2015.

Outlook for the fourth quarter

For the fourth quarter of fiscal 2015, the company expects comparable sales to be approximately flat, continued adverse effects from foreign currency exchange rates.

In addition to the 23 new stores opened year-to-date, the company expects to open eight new stores in the fourth quarter, including six international stores and two North American stores. In addition, the company anticipates closing approximately 60 stores in the US during the fiscal year through natural lease expirations.