In an update on its third fiscal quarter ending November 1, 2014 performance, Mike Jeffries led apparel retailer, Abercrombie & Fitch said its sales slipped 12%, from a year earlier quarter.
Net sales for the third quarter of 2014 went down 12% to $911.4 million from 1.033 billion for the third quarter ended November 2, 2013.
Total comparable sales, including direct-to-consumer sales too declined 10% with comparable US sales falling 7% and comparable international sales dipping higher by 15%.
However, total direct-to-consumer comparable sales bucked the trend and expanded by 8%, compared with the year ago quarter.
Abercrombie & Fitch said sales during the quarter were below expectations with comparable sales in September and October being significantly weaker than August.
“The lower sales trend was broadly based, although the international stores segment was the most difficult,” the retailer informed.
In addition, given the highly promotional and challenging environment, the clothing retailer now expects modest erosion in gross margin rates in the reporting quarter.
“The effect of lower sales and gross margins will be partially offset by continued significant expense reductions, with third quarter results also adversely impacted by the strengthened US dollar,” it stated.
Abercrombie & Fitch forecast adjusted non-GAAP net income per diluted share for the third quarter to be in the range of $0.40 to $0.42.
The above income excludes anticipated charges related to impairment of store-related assets, closures, Gilly Hicks restructuring, its profit improvement initiative, and other governance matters.
Abercrombie & Fitch ended the third quarter of 2014 with inventory at cost down 20%, compared to the end of the prior year third quarter.
"We are clearly disappointed with our results for the third quarter. Continued weak store traffic was the primary contributor to the weak sales trend, particularly in Europe,’ Mike Jefferies said.
He added, “In addition, the decline in sales of heavy logo product weighed on the sales trend as we continued to reduce that element of our assortment in response to changing consumer preferences.”
In the short term, Abercrombie & Fitch is reviewing measures to drive improvement in the critical fourth quarter.
While for the long term, the retailer continues to believe that it is taking the right steps strategically to position the company for future improvements in our performance.
This includes the completion of its move to a branded structure, strategic investments in Asia and in its Direct to Consumer business, shifting its assortment, store re-design, close underperforming US stores, etc.
Abercrombie & Fitch Co operates 834 stores in the United States and 166 stores across Canada, Europe, Asia, Australia and the Middle East and various e-commerce brand websites. (AR)
