Abercrombie & Fitch faces costing challenges
Abercrombie & Fitch Co reported unaudited results which reflected net income of $50.9 million and net income per diluted share of $0.57 for the thirteen weeks ended October 29, 2011, compared to net income of $50.0 million and net income per diluted share of $0.56 for the thirteen weeks ended October 30, 2010.
Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said:
"While our results for the third quarter were impacted by costing challenges combined with greater uncertainty in the macroeconomic environment, we remain very confident in our strategy, the underlying strength of our brands and our ability to create long-term shareholder value. Our focus remains on execution against our long-term strategy and roadmap objectives."
Third Quarter Summary
Net sales for the thirteen weeks ended October 29, 2011 increased 21% to $1.076 billion from $885.8 million for the thirteen weeks ended October 30, 2010. U.S. sales, including direct-to-consumer sales, increased 14% to $820.2 million. International sales, including direct-to-consumer sales, increased 56% to $255.7 million. Total Company direct-to-consumer sales, including shipping and handling, increased 41% to $132.4 million.
Total comparable store sales for the quarter increased 7%. By brand, comparable store sales increased 4% for Abercrombie & Fitch, 6% for abercrombie kids, and 8% for Hollister Co. Total sales by brand were $436.1 million for Abercrombie & Fitch, $104.2 million for abercrombie kids and $518.0 million for Hollister Co.
The gross profit rate for the third quarter was 60.1%, 360 basis points lower than last year's third quarter gross profit rate. The decrease in the gross profit rate was driven primarily by an increase in average unit cost combined with an approximately flat AUR.
Stores and distribution expense, as a percentage of net sales, decreased to 42.9% from 43.5% for the third quarter last year. The decrease in the stores and distribution expense rate was driven by lower store occupancy costs as a percentage of net sales.
Marketing, general and administrative expense for the third quarter was $107.8 million or 10.0% of sales compared to $102.6 million or 11.6% of sales during the same period last year. On a dollar basis, the 5% increase in marketing, general and administrative expense was due to increases in compensation, including equity compensation, and outside services, partially offset by a decrease in incentive compensation expense.
The effective tax rate for the thirteen weeks ended October 29, 2011 was 35.8%.
Net income was $50.9 million and net income per diluted share was $0.57 for the thirteen weeks ended October 29, 2011, compared to net income of $50.0 million and net income per diluted share of $0.56 for the comparable period last year.
During the third quarter of Fiscal 2011, the Company repurchased 150,000 shares of its common stock at an aggregate cost of approximately $8.8 million. As of October 29, 2011, the Company had approximately 8.2 million remaining shares available for purchase under its publicly announced stock repurchase authorizations.