Abercrombie & Fitch Q1 tumbles on costs and comps

Higher costs, “challenging” trends in Europe, and falling same-store sales in the US have combined to push apparel retailer Abercrombie & Fitch Co to a sharp drop in first quarter earnings.

The company said net income tumbled 88% to $3 million or $0.03 per share, down from $25.1 million or $0.28 per share a year earlier.

Net sales for the three months to April 28 increased 10% to $921.2 million, with US sales edging up 1% to $644.3 million. International sales jumped 42% to $277 million, and total company direct-to-consumer sales, rose 40% to $148.2 million.

But revenue at stores open at least a year fell 5%, with a drop of 4% for Abercrombie & Fitch, a decline of 11% for Abercrombie Kids, and a fall of 5% for Hollister Co.

Higher unit costs also weighed on gross profit rate for quarter, pushing it down 240 basis points to 62.6%.

“While we are disappointed that European sales trends remain challenging in a very difficult macroeconomic environment, we are largely satisfied with our overall performance for the quarter in that context,” said Abercrombie & Fitch CEO Mike Jeffries.

He added: “With cotton cost issues now largely behind us, we look forward to strong year over year earnings growth in the back half of the year.”

Looking ahead, the company lowered its sales expectations for full-year same store sales to be down by a mid-single digit percentage. But it continues to expect full year earnings in the range of $3.50 to $3.75 per share, thanks to higher gross margins and lower expenses.

International Abercrombie & Fitch stores are set to open in Hong Kong, Munich, Dublin and Amsterdam during the year, along with around 40 international Hollister stores.

For more fashion and apparel industry news, go to just-style.com

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