Abercrombie & Fitch Swings to Loss But Hollister Shows Improvement
26 August 2015 - 10:20PM
Dow Jones News
Abercrombie & Fitch Inc. swung to a loss, hurt by weaker
sales, but moves to reposition its Hollister brand showed signs of
improvement and the company's adjusted bottom line was much better
than analysts had expected.
Shares jumped sharply, up 15% in premarket trading to
$19.79.
The company posted a loss for its fiscal second quarter of
$810,000, or a penny a share, from a prior-year profit of $12.9
million, or 17 cents a share. On an adjusted basis, profit fell 39%
to $8.6 million, or 12 cents a share—while analysts had expected a
loss of 4 cents.
Total sales declined 8.2% to $817.8 million, compared with
$890.6 million a year ago. Analysts had expected $811 million.
The company's namesake brand continues to face challenges while
Hollister had a stronger showing. Sales at existing Abercrombie
stores fell 7% from a year ago. Hollister sales excluding newly
opened or closed stores dropped 1% in the recently completed
quarter, an improvement from a 6% decline in the first quarter.
"Hollister has gotten some quick traction," Executive Chairman
Arthur Martinez, said in an interview. "The Abercrombie brand
carries a lot of the baggage, and the process of getting out from
under that baggage is taking longer."
The retailer is in the midst of implementing a new strategy,
which includes updated fashions, remodeled stores and a less
exclusive mind-set. Earlier this year, it ditched the shirtless
models, sex-tinged marketing and logo-emblazoned T-shirts that
helped create a cult following before wearing thin with
shoppers.
Hollister is undergoing a refashioning from the inside out. The
clothes have more color and design elements and products that are
selling well can be replenished quickly, in a nod to fast fashion
retailers, which are constantly filling their stores with new
goods. Mr. Martinez said Hollister has cut its supply lead times in
half.
Under former Chief Executive Mike Jeffries, Hollister
storefronts had been decorated with shutters that made it hard for
shoppers to see inside, part of an exclusionary mind-set that Mr.
Martinez is trying to do away with.
Those shutters have been replaced on about 100 of Hollister's
569 stores with video screens. On the inside, five stores have been
remodeled to make them lighter, brighter and easier to shop in by
doing away with artificial trees, leather sofas and oriental rugs.
The company has also dialed back its signature scent level by
75%.
To differentiate the brands, Hollister is focusing on
high-school-aged youth, while Abercrombie is trying to appeal to a
broader audience that also includes college-aged shoppers and
beyond. But while Hollister reflects a distinct California,
surfer-infused lifestyle, Abercrombie is still searching for an
identity.
Mr. Martinez said the brand was working with outside consultants
to help in a repositioning, and hopes to have an answer before
year-end.
Last week American Eagle Outfitters Inc., another teen retailer
that has struggled, reported stronger-than-expected profit on sales
that jumped 12%, fueling expectations that the battered teen sector
might be in for a rebound.
Mr. Martinez cautioned against such thinking. "If you look
broadly at the apparel sector, it's been volatile and unpleasant,"
Mr. Martinez said.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
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(END) Dow Jones Newswires
August 26, 2015 08:05 ET (12:05 GMT)
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