Hollister disappoints as execs reiterate brick-and-mortar plan
Abercrombie & Fitch Co. on Thursday reported second quarter net sales rose 8% to $842.4 million, driven by a calendar shift and positive comparable sales. That missed the average analyst forecast cited by Reuters for $845.2 million. The company's 3% rise also missed the Thomson Reuters I/B/E/S average analyst expectation for a 3.7% boost.
By brand, comps rose 4% and sales reached $500.8 million at Hollister, missing analyst expectations for a 5.3% increase. Comps rose 2% and sales reached $341.6 million at Abercrombie, according to a company press release. Direct-to-consumer net sales rose 16% from last year to $216.4 million and were about 26% of total net sales for the quarter, compared to about 24% last year.
The company's gross profit rate reached 60.2%, expanding 110 basis points in the quarter and approximately 70 basis points from last year on a constant currency basis, net of hedging. The company ended the second quarter with $454.9 million in inventory, a 3% decrease from last year.
The company was able to tamp down on promotions in the quarter, executives said on a conference call Thursday morning, as was reflected in the company's clean inventories in the quarter.
But not even the retailer's more robust Hollister brand, which is priced lower and tends to support the company much like Old Navy does for Gap Inc., could lift results enough for many analysts' taste. The performance throws cold water on Abercrombie's turnaround, especially in light of strong consumer spending that is lifting many of its peers.
Analysts at B. Riley FBR said in comments emailed to Retail Dive that they were on the lookout for any change to plans for its store fleet. But on Thursday, the company reiterated plans to open 22 full-price stores (13 Hollister and nine Abercrombie stores) and close up to 60 stores (mostly in the U.S. and through natural lease expirations) in fiscal 2018.
The company has also begun to revamp its store concept for the Abercrombie flagship, something it had promised for years, and executives said that roll-out will continue.
The company has closed over 400 stores since 2010, and last year it remodeled 35 Hollister stores and seven new A&F prototype stores, which included 16 downsizings of existing stores. The company also closed 39 stores, fewer than the 60 executives expected going into last year.
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