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Abercrombie & Fitch posts Q2 loss, net sales down 4 percent

By Prachi Singh

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Report

Abercrombie & Fitch has reported a GAAP net loss per diluted share of 0.19 dollar for the second quarter ended July 30, 2016, compared to a GAAP net loss per diluted share of 0.01 dollar for the second quarter last year. Net sales of 783.2 million dollars were down 4 percent versus last year, with comparable sales for the second quarter down 4 percent.

"Our results for the quarter were largely in line with the expectations we set on last quarter's earnings call. Flagship and tourist locations continued to account for the vast majority of the comparable sales decline as traffic remained a significant headwind. As we look to the rest of the year, we now expect flagship and tourist locations will continue to weigh on the business,” said Arthur Martinez, Executive Chairman of the company.

Second quarter sales review

Excluding certain items, the company reported an adjusted non-GAAP net loss per diluted share of 0.25 dollar for the second quarter, compared to adjusted non-GAAP net income per diluted share of 0.12 dollar last year.

By brand, net sales for the second quarter decreased 5 percent to 363.1 million dollars for Abercrombie and decreased 4 percent to 420.1 million dollars for Hollister versus last year. By geography, net sales decreased 7 percent to 478.8 million dollars in the US and were approximately flat at 304.4 million dollars in international markets versus last year.

Direct-to-consumer sales grew to approximately 23 percent of total company net sales. Net loss attributable to Abercrombie & Fitch was 13.1 million dollars compared to 0.8 million dollars last year. Excluding certain items, adjusted non-GAAP net loss was 16.8 million dollars, compared to adjusted non-GAAP net income of 8.6 million dollars last year.

Expects adverse impact of foreign currency on sales

For fiscal 2016, the company now expects comparable sales to remain challenging through the second half of the year, with a disproportionate effect from flagship and tourist locations. The company anticipates, adverse effects from foreign currency on sales of approximately 25 million dollars and on operating income of approximately 20 million dollars, with the greatest impact in the third quarter.

Net income attributable to non-controlling interests is expected to be of approximately 5 million dollars. The company plans to open approximately 15 new stores in fiscal 2016, including approximately 10 in international markets, primarily China, and approximately five in the US. The company plans to open six new outlet stores, while shutting 60 stores primarily in the US.

The Board of Directors declared a quarterly cash dividend of 0.20 dollar per share on the Class A Common Stock of Abercrombie & Fitch payable on September 12, 2016.

Picture:Abercrombie & Fitch

Abercrombie & Fitch