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Abercrombie & Fitch

(ANF) - Get Abercrombie & Fitch Company Report

plunged close to 20% in premarket trading Thursday after the teen retailer posted worse-than-expected second-quarter results, blaming weak July sales, and offered a cautious outlook for the rest of the year.

The New Albany, Ohio-based company said profit fell by one-third from last year's quarter to $11.4 million, or 14 cents a share. The company took 2 cents worth of charges related to an ongoing profit improvement initiative.

Net sales dropped by 1% for the quarter to $945.7 million, primarily due to fewer shoppers in its U.S. stores.

Consensus estimates called for the teen retailer to post earnings of 28 cents a share on revenue of $996 million.

Shares were tumbling 16.9% at $38.90 before the markets opened.

Total U.S. sales decreased 8% to $597.3 million, while international sales increased 15% to $348.4 million, the company said. Meanwhile, Abercrombie's direct-to-consumer sales jumped 21% to $154.3 million.

Total comparable sales for the quarter, including direct-to-consumer sales, fell 10%. Comparable U.S. sales decreased 11% and comparable international sales fell 7%. Within the quarter, comparable sales were weakest in July, the company said.

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"The second quarter was more difficult than expected due to weaker traffic and continued softness in the female business, consistent with what others have reported. In that context we are planning sales, inventory and expenses conservatively for the remainder of the year," Mike Jeffries, Abercrombie's chairman and CEO, said in the earnings release.

The company said it expects third-quarter sales to fall further, forecasting diluted earnings of 40 cents to 45 cents a share. Wall Street had estimated earnings of $1.06 a share.

The company didn't give guidance beyond that "due to a lack of visibility given recent traffic trends." It now plans to open fewer international and U.S. outlet stores. Abercrombie reiterated that it plans to close approximately 40 to 50 U.S. stores this year through natural lease expirations.

With retailers across the board citing weak consumer spending and fewer mall shoppers in July, the teen sector has been particularly hard hit. Abercrombie's competitor,

American Eagle Outfitters

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, reported disappointing results on Wednesday, while



, which reports after the bell on Thursday, already warned investors of a weak quarter.

One standout is likely to be


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, which also reports earnings after the markets close on Thursday. Wall Street is expecting earnings growth of 30% for the quarter to 64 cents a share.

Despite the challenging U.S. environment, Abercrombie's Jeffries said the company is pleased with its "strong growth in our direct-to-consumer business and continued strong growth in China."

"We have also made excellent progress on our profit improvement initiative during the quarter, and we now expect savings from this initiative to exceed $100 million annually," he said. "In addition, we are nearing completion of our long-term strategic review, and we are confident that this will provide us with a clear roadmap for sustainable growth in sales, profitability and return on invested capital."

Abercrombie's gross profit rate rose 160 basis points in the quarter to 63.9%.

-- Written by Laurie Kulikowski in New York.

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