Abercrombie Starts Strategic Review of Ruehl

NEW ALBANY, OH-With a strategic review under way for its once highly touted Ruehl division, Abercrombie & Fitch Co.’s future lies overseas and in the growing Gilly Hicks chain, executives said at the company’s first-quarter conference call.

All options are on the table for Ruehl, which has about 30 stores across the country, noted Jonathan E. Ramsden, executive vice president and CFO, and no decision has yet been made. But international expansion will dominate, said Mike Jeffries, chief executive officer and chairman.

“Our future is tied to international expansion,” Jeffries said. “Clearly there is an appetite for our level of quality and store experience on an international level.”

International expansion plans in fiscal 2009 include a flagship Abercrombie & Fitch and abercrombie stores in Milan, an Abercrombie & Fitch flagship in Tokyo, as well as 10 mall-based stores, including one abercrombie store in Canada, seven Hollister Co. stores in the United Kingdom, one Hollister Co. store in Germany and one Hollister Co. store in Italy.

Domestically, Hollister will open a flagship in New York City, as well as 10 mall-based stores in fiscal 2009, including two abercrombie stores, four Hollister Co. units, two Gilly Hicks stores and two outlets.

Gilly Hicks also remains a growth vehicle, albeit one still in the experimentation stage. A smaller, 5,500-square-foot prototype has been created for future rollouts. The current real estate market also will help expansion, Jeffries said.

“We are getting better and better real estate deals, and that will clearly affect when we can start aggressively going after the business,” Jeffries said.

The market also is being carefully assessed as the company has a significant number of leases expiring over the next three years: 70 in 2009, and 210 in 2010 and 2011.

“We are looking closely at these leases,” with some closures, or renegotiations for shorter terms likely, Ramsden said.

For the quarter, total company net sales were $612.1 million, down 24% from the same period last year. Comparable store sales decreased 30%, with Abercrombie & Fitch stores declining 26%, abercrombie stores dropping 33%, Ruehl units dropping 34% and Hollister units down 32%. The company posted a net loss of $26.8 million, compared to net income of $62.1 million for the prior-year quarter.