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Abercrombie Q2 sales drop

By FashionUnited

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Abercrombie & Fitch Co. today reported unaudited results which reflected net income of

15.5 million dollars and net income per diluted share of 0.19 dollars for the thirteen weeks ended July 28, 2012, compared to net income of 32.0 million dollars and net income per diluted share of 0.35 dollars for the thirteen weeks ended July 30, 2011.

CEO Mike Jeffries said: "The second quarter results we are reporting today are disappointing and below our expectations. In particular, we saw a further deceleration in the trend in our international stores, while our U.S. chain stores also comped negatively for the quarter for the first time since 2009. Our direct to consumer business remained a bright spot, posting its tenth successive quarter with growth of 25 percent or better."

Net sales for the thirteen weeks ended July 28, 2012 increased 4 percent to 951.4 million dollars from 916.8 million dollars for the thirteen weeks ended July 30, 2011. Total U.S. sales, including direct-to-consumer sales, decreased 5 percent to 648.0 million dollars. Total international sales, including direct-to-consumer sales, increased 31 percent to 303.4 million dollars.

Total comparable store sales for the quarter decreased 10 percent relative to last year. By brand, comparable store sales decreased 11 percent for Abercrombie & Fitch, 10 percent for abercrombie kids, and 10 percent for Hollister Co. Total sales by brand were 362.5 million dollars for Abercrombie & Fitch, 76.3 million dollars for Abercrombie kids and 485.6 million dollars for Hollister Co.

The gross profit rate for the second quarter was 62.5 percent, 110 basis points lower than last year's second quarter gross profit rate. The decrease in the gross profit rate was driven by an increase in average unit cost and the adverse effect of exchange rates, partially offset by an international mix benefit.

The effective tax rate for continuing operations for the thirteen weeks ended July 28, 2012 was 38.9 percent compared to 30.7 percent for the prior year comparable period. The increase in the rate was primarily the result of a reduced benefit related to international operations which are taxed at a lower rate.

The company ended the second quarter of fiscal 2012 with 312.2 million dollars in cash and cash equivalents, 20.1 million dollars in current marketable securities, and borrowings under the revolving credit agreement of 75.0 million dollars.

Based on a lower sales trend than previously projected, the company now expects full year diluted earnings per share of approximately 2.50 dollars to 2.75 dollars. This projection assumes comparable store sales will decline 10 percent for the second half of the year. The company continues to expect substantial recovery of the gross margin rate erosion seen in 2011 on a 2012 full year basis.

On August 14, 2012, the Board of Directors declared a quarterly cash dividend of 0.175 dollars per share on the Class A Common Stock of Abercrombie & Fitch Co. payable on September 11, 2012 to shareholders of record at the close of business on August 27, 2012.

Abercrombie & Fitch (A&F) is an American retailer that focuses on casual wear for consumers aged 18 to 22. At the end of the second quarter, the company operated a total of 1,055 stores and e-commerce websites.
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