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Abercrombie & Fitch direct-to-consumer net sales declines
17
Aug '09
Abercrombie & Fitch Co. reported unaudited second quarter results which reflected a net loss of $26.7 million and a net loss per basic and diluted share of $0.30 for the thirteen weeks ended August 1, 2009, compared to net income of $77.8 million and net income per diluted share of $0.87 for the thirteen weeks ended August 2, 2008.

The unaudited results also reflect a loss before income taxes of $19.8 million for the thirteen weeks ended August 1, 2009, which includes pre-tax charges of $24.4 million associated with the closure of RUEHL operations and related store asset impairment charges as further described below.

Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said: "We continued to be confronted with very challenging conditions during the second quarter. We believe we are doing the right things to address those challenges and improve our domestic business. In the meantime, we remain very encouraged by our prospects for international growth."

Second Quarter 2009 Financial Results
Net sales for the thirteen weeks ended August 1, 2009 decreased 23% to $648.5 million from $845.8 million for the thirteen weeks ended August 2, 2008. Total Company direct-to-consumer net sales decreased 13% to $48.7 million for the thirteen week period ended August 1, 2009, compared to the thirteen week period ended August 2, 2008. Total Company second quarter comparable store sales decreased 30%.

The gross profit rate for the quarter was 66.5%, 360 basis points lower than last year's second quarter gross profit rate. The decrease in gross profit rate was primarily attributable to a higher markdown rate for the second quarter this year compared to the second quarter last year.

Stores and distribution expense, as a percentage of sales, increased to 56.6% from 42.6%. 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, as well as $23.0 million of net lease termination related costs associated with the exit of RUEHL. Stores and distribution expense for the second quarter also included RUEHL store asset impairment charges of $0.8 million.

Marketing, general and administrative expense for the second quarter was $88.7 million compared to $109.0 million during the same period last year. The reduction in marketing, general and administrative expense includes savings related to employee compensation and benefits, travel, outside services and marketing. Marketing, general and administrative expense for the quarter included $0.6 million of severance charges associated with the exit of RUEHL.

Operating loss for the second quarter was $21.5 million, inclusive of $23.6 million pre-tax charges associated with the exit of RUEHL and $0.8 million related store asset impairment charges.


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