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Abercrombie & Fitch reports loss in Q4 and FY14

By Prachi Singh

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Abercrombie & Fitch reported unaudited fourth quarter financial results that reflected GAAP net income of 44.4 million dollars and net income per diluted share of 0.63 dollars for the thirteen weeks ended January 31, 2015, compared to GAAP net income of 66.1 million dollars and net income per diluted share of 0.85 dollars for the thirteen weeks ended February 1, 2014. Additionally, the company reported full year GAAP net income of 51.8 million dollars and net income per diluted share of 0.71 dollars for the fifty-two week period ended January 31, 2015, compared to GAAP net income of 54.6 million dollars and net income per diluted share of 0.69 dollars, last year.

Excluding certain charges, the company reported adjusted non-GAAP net income of 80.8 million dollars and net income per diluted share of 1.15 dollars for the fourth quarter, compared to adjusted non-GAAP net income of 104.3 million dollars and net income per diluted share of 1.34 dollars for the fourth quarter last year. Additionally, the company reported non-GAAP net income of 112.3 million dollars and net income per diluted share of 1.54 dollars for the full year, compared to non-GAAP net income of 150.6 million dollars and net income per diluted share of 1.91 dollars for the full year last year.

Commenting on the results, Arthur Martinez, Executive Chairman, said, “Our sales for the fourth quarter were somewhat below expectations, but a slightly better gross margin rate and strong expense management enabled us to deliver EPS within our guidance range. For the full year, our results came in well below our initial expectations, as an expected improvement in comparable sales did not materialize, and further progress on expense reduction was insufficient to offset weaker sales.”

Net Sales for the fourth quarter decreased 14 percent to 1.120 billion dollars, driven by a 10 percent comparable sales decline, the adverse effects of changes in foreign currency exchange rates of approximately 3 percent, and net store closures. Direct-to-consumer comparable sales decelerated significantly in the fourth quarter, driven primarily by Europe, where site traffic was down and shipping and other promotions drove less of a conversion benefit than in prior quarters. Net sales by brand for the fourth quarter were 424.1 million dollars for Abercrombie & Fitch, 100.7 million dollars for abercrombie kids and 593.5 million dollars for Hollister. Comparable sales by brand, including direct-to-consumer, decreased 9 percent for Abercrombie & Fitch, decreased 6 percent for abercrombie kids, and decreased 11 percent for Hollister.

Net sales by brand for the full year were 1.450 billion dollars for Abercrombie & Fitch, 321.4 million dollars for abercrombie kids and 1.948 billion dollars for Hollister. Comparable sales by brand, including direct-to-consumer, decreased 4 percent for Abercrombie & Fitch, decreased 7 percent for abercrombie kids, and decreased 10 percent for Hollister.

The gross profit rate for the full year was 61.8 percent, 80 points lower than last year, primarily driven by increased promotional activity, including shipping promotions in the direct-to-consumer business, partially offset by lower average unit cost. During the fiscal year, the company opened seven international Hollister chain stores, three international Abercrombie & Fitch chain stores, including its first in the Middle East, and opened a Hollister chain store and an abercrombie kids chain store in the US. In addition, the company opened its first Abercrombie flagship store in Shanghai and its first international abercrombie kids flagship store in London.

The company also opened nine outlet stores during the fiscal year, three internationally, in Europe and Asia, and six in the US. In addition, the company closed 52 US stores, including one Gilly Hicks store, seven international Gilly Hicks stores and one Hollister outlet store in Spain.

The company plans to open 15 full-price stores in fiscal 2015 in the key growth markets of China, Japan and the Middle East and four full price stores in North America. It plans to open 11 new outlet stores in the US. In addition, the company anticipates closing approximately 60 stores in the US during the fiscal year through natural lease expirations.

Abercrombie & Fitch