Abercrombie Sees Decline in Net Sales, Net Income

NEW ALBANY, OH-Abercrombie & Fitch Co. reported a net income of $38.8 million or $0.44 per diluted share for the third quarter; this is a decline from 2008′s Q3 figure of $63.9 net income. Net sales decreased this quarter by 15% to $765.4 million.

“During the quarter, we made advances in our international strategy with the opening of a flagship location in Italy as well as additional Hollister mall-based stores in the United Kingdom,” says Mike Jeffries, CEO and chairman of the board. “The passion and enthusiasm from the international customer that greeted us at these openings encourage us in our long-term strategy of aggressively pursuing international growth for our brands.”

With these positive results the company plans to ramp up its expansion abroad while “moving to a more offensive footing domestically,” Jeffries says.

The company opened a flagship Abercrombie & Fitch store in Milan this quarter and two Hollister stores in the UK. By the end of December a flagship A&F store will open in Tokyo as well as another five Hollister stores throughout Europe. By the start of 2010 European Hollister will have 12 stores, 10 of which opened this year.

In 2010 the company plans to open a Hollister Epic location on Fifth Avenue in Manhattan by the fourth quarter. This store was originally slated to be a Abercrombie kids flagship store but company executives switched gears based on the market.

Additionally Abercrombie will open a flagship A&F store in Copenhagen. A second location, this one in Fukuoka, Japan will open by the end of 2010. The company plans on opening additional Hollister stores internationally but executives did not name potential cities for new stores and estimated 10 new stores would be opened next year.

This year Abercrombie has closed 13 stores domestically, beyond Ruehl closings, and expect more closings in the fourth quarter of underperforming stores. As GlobeSt.com reported earlier in the year, Abercrombie is in the process of closing every Ruehl location by the end of this year. Abercrombie will incur aggregate pre-tax charges of approximately $60 million from closing the Ruehl line.

Additionally to drive clients to the domestic stores, company executives say the price points on several clothing items will be cut during the first quarter. Company executives also say a large part of the decline in net sales is due to a lack of inventory, especially in its jean department, a problem the company is trying to improve.