Abercrombie warns of challenging holiday quarter, shares skid

[BENGALURU] Abercrombie & Fitch Co warned of a challenging holiday quarter after reporting its 15th straight decline in quarterly sales, indicating that the teen apparel retailer's turnaround efforts had failed to attract shoppers.

Shares of the company, once popular for its logo-emblazoned polo shirts, sweatpants and sweat shirts, fell 13.29 per cent to US$14.68 on Friday.

Sales at Abercrombie's established stores fell 6 per cent, while analysts on average had expected a 3.9 per cent decline, and the company said it expected sales to be challenging in the fourth quarter, but "modestly improved" from the third quarter.

The comments mirrored those of apparel chain Gap Inc, which also flagged a weak holiday season, saying traffic would fall further in its fourth quarter.

Abercrombie has been closing underperforming stores and investing in its online business to cope with rapidly changing consumer tastes and stiff competition from online rivals and fast-fashion retailers such as H&M and Inditex's Zara.

But its efforts have made little progress.

Abercrombie's new marketing campaign was too confusing and complex, failing to address the company's lack of traction with customers, research firm Conlumino's chief executive Neil Saunders said in a note.

Abercrombie's net sales fell 6.5 per cent to US$821.73 million in the third quarter ended Oct 29. Analysts on average had expected US$830.6 million, according to Thomson Reuters I/B/E/S.

Comparable sales at flagship Abercrombie stores fell 14 per cent in quarter, compared with a 5 per cent drop in the year-earlier period. Analysts on average had expected a 6.2 per cent fall, according to research firm Consensus Metrix.

Comparable sales at teen-specialty Hollister stores, which the company has been remodelling, were flat, compared with a 1.9 per cent drop expected by analysts.

The Hollister brand and the company's sweaters for women are expected to continue to do well during the holidays, chief financial officer Joanne Crevoiserat said on a call.

Abercrombie also said it would close its A&F flagship store in Seoul in January and would take a US$16 million charge in the fourth quarter from lease termination of its flagship store in Hong Kong.

Net income attributable to the company fell to US$7.88 million, or 12 US cents per share, in the quarter, from US$41.89 million, or 60 US cents per share, a year earlier.

Excluding certain items, Abercrombie earned 2 US cents per share, well below analysts' average estimate of 21 US cents.

REUTERS