Abercrombie's Revenue and Outlook Disappoint

The retailer says revenue will come in well under Wall Street's expectations.
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Abercrombie & Fitch (ANF) - Get Report eked out another gain in earnings per share, despite plunging same-store sales. But the company once again warned analysts to lower their outlook.

In its third quarter, which ended Nov. 1, the apparel retailer earned $50.5 million, or 51 cents a share. Per-share profits were up 6% from the same period a year ago, when Abercrombie earned $47.7 million, or 48 cents a share.

The company's overall sales rose 6.1% from the third quarter last year, to $444.98 million. But the company's same-store sales, which compare results at like outlets open more than one year, fell 9% from the same period last year.

Abercrombie's results met Wall Street's revised earnings expectations but fell well short of its revenue estimates. Analysts polled by Thomson First Call were expecting the company to earn 51 cents a share on sales of $454.5 million. Analysts had previously estimated that Abercrombie would earn 54 cents a share, but they dropped their estimates twice during the quarter after the company

reported disappointing sales.

The apparel retailer estimated that its earnings per share for the fourth quarter will come in at the same level as last year, when the company earned 93 cents a share on $534.5 million in sales. That result would fall far below analysts current fourth-quarter estimates of $1 a share in earnings on $594.31 million in sales.

The results would also break Abercombie's record of 45 straight quarters of year-over-year earnings growth.

Abercrombie shares closed regular trading up 89 cents, or 3.2%, to $28.75. In after-hours trading, the company's shares fell 85 cents or 3%.

Abercrombie has been battling slow sales for some time now. Its same-store sales have fallen nine straight months and in 28 of the last 30 months.

Despite the sales declines, the company has been able to squeeze out continuous earnings growth through cost savings. But that ability to hold the line on costs may be coming to an end.

In the third quarter, Abercrombie did post a gain on gross profit margin, which represents the difference between what consumers pay for its products and the direct costs of those products to the company. In the quarter, Abercrombie's gross margin increased 1.5 percentage points to an impressive 41.3% of sales.

But increases in the company's operating costs essentially nullified that gain. Marketing and administrative expenses increased 1.5 percentage points, to 18.3% of sales.