Abercrombie & Fitch (ANF) is still struggling to get back in style with today’s teens, as the retailer reported sales for the fiscal third-quarter fell a sharper-than-expected 12%. Investors aren’t happy with the news, sending the company’s shares down sharply. Here are some important points from the sales report.
What you need to know: The teen retailer, like many of its peers, blamed weak store traffic for the sales decline. Results were particularly bruising in Europe, with same-store sales from international stores falling 15% in the quarter ended Nov. 1. The U.S. business didn’t fare much better, where same-store sales dropped 7%.
The company, known by many for its expensive, logo-adorned gear, is facing pressure from fast fashion chains like Forever 21 and H&M. Abercrombie has tried to retain its footing by going after more grown-up, affluent shoppers, partly by moving to lessen the use of its logos in the U.S. and expand the variety of styles it stocks. The retailer in late August said it would eventually take the North America logo business “to practically nothing.” On Friday, Chief Executive Mike Jeffries said the decline in sales of heavy logo product weighed on results, noting Abercrombie is reducing those items from its assortment to address changing consumer preferences.
The big number: All of the metrics Abercrombie reported in its business update were poor. Sales are expected to drop to $911.4 million, worse than the $983 million projected by analysts surveyed by Bloomberg. Adjusted profit is only expected to range between 40 cents to 42 cents a share, also far below the 68-cent profit Wall Street was looking for. Sales during the quarter were “significantly weaker” in September and October than in August, so the decline has gotten worse recently.
What you might have missed: Although Abercrombie certainly has its own problems, the retailer isn’t the only company that’s lamented poor store traffic. Michael Kors (KORS), an affordable luxury brand that is more in style as it reports sharply higher sales, recently said it and other retailers have experienced weak traffic at shopping malls. Gap (GPS) earlier this month issued weak sales for October, especially for the namesake and Banana Republic brands.
Unlike those other brands, analysts have said Abercrombie is undergoing its most comprehensive brand transformation in the past 15 years. Telsey Advisory Group in a recent research report said the retailer is ultimately aiming to tackle a delicate balance act, it wants to be more fashionable and resonate with current style trends, but also hopes to maintain its higher price points by selling consumers on the quality of its garments.
