'First quarter is clearly difficult' - Abercrombie & Fitch CEO

15 May '09

5 min read

Abercrombie & Fitch Co. reported unaudited first quarter results which reflected a net loss of $26.8 million and a net loss per basic and diluted share of $0.31 for the thirteen weeks ended May 2, 2009, compared to net income of $62.1 million and net income per diluted share of $0.69 for the thirteen weeks ended May 3, 2008.

The unaudited financial results for the thirteen weeks ended May 2, 2009 do not include a non-cash impairment charge, that is currently being determined and is to be recorded in respect of the first quarter, associated with a strategic review of the Ruehl business as further described in this press release. The impairment charge will be reflected in the condensed consolidated financial statements filed with Abercrombie & Fitch Co.'s Quarterly Report on Form 10-Q for the fiscal quarter ended May 2, 2009.

First Quarter Sales Highlights
• Total Company net sales decreased 24% to $612.1 million; comparable store sales decreased 30%
• Total direct-to-consumer net sales decreased 21% to $49.1 million
• Abercrombie & Fitch net sales of $264.7 million; Abercrombie & Fitch comparable store sales decreased 26%
• abercrombie net sales of $69.1 million; abercrombie comparable storesales decreased 33%
• Hollister Co. net sales of $262.4 million; Hollister Co. comparable store sales decreased 32%
• RUEHL net sales of $10.4 million; RUEHL comparable store sales decreased 34%

Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said:
"The first quarter was clearly a difficult one for us. With a challenging economic environment, the consumer continues to show a reluctance to spend on premium brands; a price consciousness dictating shopping habits unlike anything I have ever seen. We believe this is a temporary phenomenon but will approach the current conditions with a conservative mindset until we see a clear improvement. This year will be a transitional year for us as we continue to focus our efforts on laying the groundwork for our long term success and prosperity by protecting our brands, preserving cash and pursuing our international growth opportunities."

First Quarter 2009 Financial Results
Net sales for the thirteen weeks ended May 2, 2009 decreased 24% to $612.1 million from $800.2 million for the thirteen weeks ended May 3, 2008. Total Company direct-to-consumer net sales decreased 21% to $49.1 million for the thirteen week period ended May 2, 2009, compared to the thirteen week period ended May 3, 2008. Total Company first quarter comparable store sales decreased 30%.

The gross profit rate for the quarter was 63.3%, 350 basis points lower than last year's first quarter. The decrease in gross profit rate was attributable to a higher markdown rate for this year's first quarter.

Stores and distribution expense, as a percentage of sales, increased to 55.8% from 42.7%, before taking into account the non-cash impairment charge currently being determined in connection with the strategic review of the Ruehl business. Although the Company was able to achieve savings in store payroll, direct to consumer and other variable expenses, the reduction in those expenses was less than the rate of the sales decline and not enough to offset increases in rent, depreciation and other occupancy costs.

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