Abercrombie reports 1st quarter losses
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Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said: "The first quarter was clearly a difficult one for us. With a challenging economic environment, the consumer continues to show a reluctance to spend on premium brands; a price consciousness dictating shopping habits unlike anything I have ever seen. We believe this is a temporary phenomenon but will approach the current conditions with a conservative mindset until we see a clear improvement. This year will be a transitional year for us as we continue to focus our efforts on laying the groundwork for our long term success and prosperity by protecting our brands, preserving cash and pursuing our international growth opportunities."
The gross profit rate for the quarter was 63.3%, 350 basis points lower than last year's first quarter. The decrease in gross profit rate was attributable to a higher markdown rate for this year's first quarter.
Stores and distribution expense, as a percentage of sales, increased to 55.8% from 42.7%, before taking into account the non-cash impairment charge currently being determined in connection with the strategic review of the Ruehl business.
Marketing, general and administrative expense for the first quarter was $89.5 million compared to $104.7 million during the same period last year. The reduction in marketing includes savings related to employee compensation and benefits, travel, outside services and marketing.
The Company announced today that it is conducting a strategic review of its Ruehl operation, the outcome of which has not been determined at this time. The Company remains on track to open four flagship stores in fiscal 2009 including Hollister Co. in Soho, Abercrombie & Fitch and abercrombie in Milan and Abercrombie & Fitch in Tokyo.
Internationally, the Company now expects to open ten mall-based stores in fiscal 2009, including one abercrombie store in Canada, seven Hollister Co. stores in the United Kingdom, one Hollister Co. store in Germany and one Hollister Co. store in Italy.
Domestically, the Company now expects to open ten mall-based stores in fiscal 2009, including two abercrombie stores, four Hollister Co. stores, two Gilly Hicks stores and two outlet stores.
At the end of the first quarter, the Company operated 350 Abercrombie & Fitch stores, 209 abercrombie stores, 507 Hollister Co. stores, 29 RUEHL stores and 16 Gilly Hicks stores in the United States. The Company also operated three Abercrombie & Fitch stores, three abercrombie stores and five Hollister Co. stores in Canada, and one Abercrombie & Fitch store and three Hollister Co. stores in the United Kingdom. The Company operates e-commerce websites at www.abercrombie.com, www.abercrombiekids.com, www.hollisterco.com, www.ruehl.com and www.gillyhicks.com.
Image: Abercrombie campaign