Abercrombie & Fitch Q1FY'13 sales fall 9%

Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said: "Our results for the first quarter reflect a sixteen cent improvement in earnings per share versus last year, including better than expected gross margin rate improvement and tight expense management. 

The first quarter proved to be more difficult than expected on the top-line due to more significant inventory shortage issues than anticipated, added to by external pressures.

However, comparable sales trends progressively improved during the quarter and with the inventory headwinds largely behind us, we expect to see continued sequential improvement in the second quarter.  We are also making good progress on our cross-functional initiatives, which we expect will generate substantial operating margin improvement on a sustainable, long-term basis."

First Quarter Summary

Net sales for the thirteen weeks ended May 4, 2013 decreased 9% to $838.8 million from $921.2 million for the thirteen weeks ended April 28, 2012. Total U.S. sales, including direct-to-consumer sales, decreased 17% to $534.9 million. Total international sales, including direct-to-consumer sales, increased 10% to $303.9 million. Total Company direct-to-consumer sales, including shipping and handling, decreased 10% to $132.7 million.

Due to the 53rd week in Fiscal 2012, first quarter comparable sales are compared to the thirteen week period ended May 5, 2012.  The effect of the calendar shift was not material to total sales.

Total comparable sales for the quarter, including direct-to-consumer sales, decreased 15% with comparable store sales decreasing 17% and comparable direct-to-consumer sales decreasing 6%.  Comparable sales for the quarter, including direct-to-consumer sales, decreased 14% for the U.S. and decreased 16% for international.  Within the quarter, comparable sales were weakest in February and March.

By brand, comparable sales, including direct-to-consumer sales, decreased 13% for Abercrombie & Fitch, decreased 5% for abercrombie kids, and decreased 18% for Hollister Co. Total sales by brand were $325.0 million for Abercrombie & Fitch, $73.0 million for abercrombie kids and $421.2 million for Hollister Co.

The gross profit rate for the first quarter was 65.9%, 720 basis points higher than last year's first quarter gross profit rate.  The increase in the gross profit rate was primarily driven by a benefit from a higher mix of spring merchandise selling and a decrease in product costs.

Stores and distribution expense for the first quarter was $449.1 million, down from $455.7 million last year.  As a percentage of sales, expense savings in store payroll, repairs and maintenance, and other stores and distribution expense were more than offset by the deleveraging effect of negative comparable sales.