Nov 9, 2014
Abercrombie's turnaround efforts are hurt by lower mall traffic
Nov 9, 2014
Abercrombie & Fitch Co estimated quarterly profit and sales below analysts' expectations as fewer visitors to malls hurt traffic to its stores, at a time the company is struggling to shed its image of being a logo-centric apparel retailer.
Shares of the company, which sells teen apparel under brands such as Abercrombie & Fitch and Hollister, fell as much as 14.3 percent to a two-year low of $30.31.
After two-and-a-half years of falling same-store sales, Abercrombie said in August it would shed its traditional logo-centric apparel, which was much sought after by teens in the past two decades.
Young shoppers now prefer trendier and cheaper clothes sold by "fast-fashion" chains such as Forever 21, Inditex's Zara and H&M.
"There are too many stores, too many players, aggressive new entrants by lower priced chains and, perhaps most important, a customer base that is not interested in logos," Wunderlich Securities analyst Eric Beder wrote in a note on Friday.
Abercrombie is now focusing on more fashionable clothing and is also competing on price to win back customers.
The company's new offerings for girls sport floral prints and sequins and are available in larger sizes. Abercrombie has also expanded its portfolio of accessories such as handbags, clutches and jewelry.
However, "if mall traffic declines, fewer eyeballs will be noticing the changes," Mizuho Securities USA analyst Betty Chen told Reuters.
"The environment is very difficult for any apparel retailer, and here you have one that is effectively trying to turn around. We believe that is incrementally difficult," she said.
Abercrombie's global same-store sales declined 10 percent in the third quarter ended Nov. 1, while U.S. same-store sales fell 7 percent.
"Continued weak store traffic was the primary contributor to the weak sales trend, particularly in Europe, where the environment there showed signs of further slowing," Chief Executive Mike Jeffries said in a statement.
The company gets nearly two-thirds of its total revenue from the United States and about a quarter from Europe.
Other mall-based apparel retailers such as Gap Inc and Ann Inc also reported weaker-than-expected comparable sales this week.
Abercrombie estimated adjusted profit of 40-42 cents per share and revenue of $911.4 million for the third quarter.
Analysts on average had expected a profit of 67 cents per share and sales of $982.2 million, according to Thomson Reuters I/B/E/S.
Abercrombie is scheduled to release its results on Dec. 3.
The company's shares were down 14 percent at $30.43 in noon trading on the New York Stock Exchange.
Up to Thursday's close, the stock had fallen more than 22 percent from its year-high of $45.50 hit on Aug. 27.
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