Led by a decline of 9% in US sales, net sales at NYSE-listed apparel retailer Abercrombie & Fitch Co slipped 6% year on year in the thirteen weeks to August 2, 2014.
In the second fiscal quarter of 2014, revenues at Abercrombie & Fitch Co. fell 6% from a year ago quarter to $891 million, of which US sales went down 9% to $546 million, while global turnover declined by a marginal 1% to $345 million.
Excluding certain charges, in second quarter of 2014, Abercrombie reported adjusted net income of $14.1 million for diluted earnings per share of $0.19 compared to adjusted net income of $13.0 million and diluted earnings per share of $0.16 for the second quarter of last year.
Abercrombie said, US comparable store sales for the second quarter of 2014 showed slight sequential improvement, while global comparable store sales declined sequentially, particularly in Europe.
The retailer added that, direct-to-consumer comparable sales were positive in the second quarter, but by a lower percentage than in the first quarter.
Net sales brand-wise for the second quarter of 2014 were $349.6 million for Abercrombie & Fitch, $70.9 million for abercrombie kids and $464.6 million for Hollister Co.
Comparable sales by brand, including direct-to-consumer, decreased 1% for Abercrombie & Fitch, decreased 6% for abercrombie kids, and decreased 10% for Hollister Co.
The gross profit rate for the second quarter of 2014 stood at 62.1%, 180 basis points lower than last year, from an increase in promotional activity, Abercrombie said.
Stores and distribution expense for the second quarter of 2014 touched $426.3 million, down from $471.7 million last year. They included $1.2 million of charges related to the profit improvement initiative.
However, stores and distribution expense rate for the quarter fell to 47.9% of net sales, down 200 basis points from last year, driven primarily by savings in store payroll partially offset by higher direct-to-consumer expense.
Marketing, general and administrative expense for the second quarter totalled $111.0 million, down 6% to $117.6 million last year. These too included $0.7 million of charges related to the profit improvement initiative and also due to a reduction in compensation expense.
Net other operating income was $4.3 million for the second quarter of 2014, compared to $4.4 million in second quarter of last year, both of which included insurance recoveries. The effective tax rate for the second quarter of 2014 was 26.3% compared to 34.7% for last year.
Abercrombie & Fitch ended the second quarter with $550 million in inventory at cost, down 13% versus the prior year second quarter.
Mike Jeffries, CEO at Abercrombie & Fitch said, “We are confident that the evolution of our assortment will drive further improvements going forward, in particular as we move past the headwind of adverse likes in our logo business, as we work to strategically reduce that element, in our assortment.”
