Abercrombie's Sales Slip as Fewer Shoppers Visit Its Stores
26 May 2016 - 10:40PM
Dow Jones News
Abercrombie & Fitch Co.'s turnaround efforts were derailed
last quarter, as fewer shoppers visited its stores and the teen
retailer tried to hold the line on discounts.
Sales at stores open at least a year fell 4% in the fiscal first
quarter ended April 30, marking a reversal from the preceding
quarter, when the company reported its first gain in more than
three years. Analysts had expected a 1.5% increase.
Executive Chairman Arthur Martinez attributed the decline to
"traffic headwinds, particularly in international markets and in
our U.S. flagship and tourist stores." Same-store sales are
expected to remain challenged in the second quarter and improve in
the second half of the year.
The New Albany, Ohio, company said total revenue fell 3% to
$685.5 million for the quarter. Its net loss was $39.6 million, or
59 cents a share, compared with $63.2 million, or 91 cents, a year
ago. Analysts had expected a loss of 51 cents a share on $709
million of revenue, according to FactSet.
As in previous quarters, the company's Hollister brand performed
better than the flagship brand. Hollister sales at stores open at
least a year were flat, while that metric fell 8% at
Abercrombie.
Abercrombie has been hit hard by changing consumer preferences,
declining mall traffic and fierce competition from fast-fashion
players. After the company's highly sexual image cultivated by
former CEO Mike Jeffries started alienating shoppers, the retailer
began updating its merchandise assortment and revamping stores.
Mr. Martinez said the company has also pulled back on promotions
and is now selling more merchandise at full price. Even as many
retailers are anticipating a highly promotional environment in the
coming months, Mr. Martinez said he doesn't expect to change the
pricing strategy at Abercrombie. Passing up short-term gains from
promotions is a "price that needs to be paid" for the long-term
health of the company, he said in an interview.
Abercrombie joins a growing list of retailers reporting a weak
start to the year. Poor results at department stores and specialty
retailers have illustrated consumers' shift away from
brick-and-mortar stores. Amazon.com Inc., meanwhile, has made an
aggressive push into fashion and apparel sales.
"The traffic situation is a systemic problem for the industry,"
said Mr. Martinez. "Our job is to make the most of the traffic we
do get."
He said Abercrombie hasn't ruled out the option of selling
merchandise on Amazon. "As our brands come back to their status and
health, we will be looking for additional channels to take our
products," he said. "I would never say never to anything, but we
have an awful lot of work to do before we can think of anything
like that."
Last week, Gap Inc. CEO Art Peck said in response to an
investor's question at the annual shareholder meeting that the
company is open to selling merchandise on Amazon and other third
parties.
Abercrombie has been operating without a chief executive for
more than a year. Since Mr. Jeffries departed in December 2014, the
company has been run by an office of the chairman, which includes
Mr. Martinez.
The retailer recently promoted Hollister brand President Fran
Horowitz to the role of company president and chief merchandising
officer. Ms. Horowitz is seen as a top candidate for the CEO
job.
On Monday, the company named Target Corp. veteran Stacia
Andersen and Victoria's Secret veteran Kristin Scott to run the
Abercrombie and Hollister brands, respectively. Ms. Andersen will
replace Christos Angelides, who stepped down from his role in
December. The company's chief operating officer, Jonathan Ramsden,
is also departing from his role effective June 15.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com
(END) Dow Jones Newswires
May 26, 2016 08:25 ET (12:25 GMT)
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