Abercrombie & Fitch net sales decline 14 percent

Abercrombie & Fitch reporting its unaudited first quarter financial results said that its GAAP net loss was 63.2 million dollars and net loss per diluted share was 0.91 dollars for the thirteen weeks ended May 2, 2015, compared to a GAAP net loss of 23.7 million dollars and net loss per diluted share of 0.32 dollars for the thirteen weeks ended May 3, 2014. Net sales for the quarter decreased 14 percent to 709.4 million dollars, driven by a comparable sales decline of 8 percent and an adverse effect from changes in foreign currency exchange rates of 6 percent.

Excluding certain charges, the Company reported an adjusted non-GAAP net loss of 37.2 million dollars and net loss per diluted share of 0.53 dollars for the first quarter, compared to an adjusted non-GAAP net loss of 13 million dollars and net loss per diluted share of 0.17 dollars for the first quarter last year.

Commenting on the results, Arthur Martinez, Executive Chairman, said, “During the quarter, the company continued to take major strides to revitalize its brands, enhance performance, and position itself for a return to profitable growth. We knew the first quarter was going to be difficult due to a number of factors, both internal and external and, most significantly, because many of the actions we are taking to improve our business are in the early stages of implementation and have not yet been fully realized.”

Net sales for the first quarter decreased 11percent to 448.9 million dollars in the US and 18 percent to 260.5 million dollars internationally. Comparable sales for the first quarter decreased 7 percent in the US and 9 percent internationally. On a sequential basis, Abercrombie comparable sales declined slightly in both the US and internationally, while Hollister comparable sales improved in both, due to positive comparable sales in Asia and broad-based sequential improvement in Europe, including in the UK.

Net sales from direct-to-consumer and omnichannel grew to approximately 23 percent of the total company net sales in the first quarter, compared to approximately 21percent of total company net sales last year. The gross profit rate was 58 percent, 420 basis points lower than last year. Excluding certain charges, the gross profit rate for the first quarter was 61.8 percent, 70 basis points higher than last year on a constant currency basis, primarily due to lower average unit cost.

During the first quarter, the company opened two international Hollister chain stores, one international Abercrombie & Fitch chain store and three US Abercrombie & Fitch outlet stores. As previously announced, on May 21, 2015, the Board of Directors declared a quarterly cash dividend of 0.20 dollars per share on the Class A Common Stock of Abercrombie & Fitch Co.

The Company said it currently expects continued headwinds from foreign currency exchange rates, continued sequential comparable sales improvement into the second quarter and the second half of the fiscal year. Gross margin rate is expected to be flat to slightly up, driven by average unit cost reductions, partially offset by adverse effects from current foreign currency exchange rates. The Company plans to open 17 full-price stores in fiscal 2015 in the key growth markets of China, Japan and the Middle East and five full price stores in North America. The company expects to open nine new outlet stores and anticipates closing approximately 60 stores in the US.