Abercrombie & Fitch sees "significant headwinds"
Teen clothing retailer Abercrombie & Fitch has confirmed plans to close up to 50 stores in the US this year as it revealed a downbeat forecast for the first quarter.
Speaking to investors on Friday (22 February), CFO Jonathan Ramsden said: "During fiscal 2012, we closed 47 stores, and we expect to close approximately 40 to 50 US stores in 2013, primarily through natural lease expirations at the end of the year."
It said it had closed more than 135 stores in the last few years - mainly its A&F and Abercrombie Kids banners.
Looking ahead, Abercrombie & Fitch warned of the challenges it faces during the first quarter as it expects to record a slight loss per diluted share.
In what continues to be a challenging macroeconomic environment, Ramsden said the company expects to be hit by some "significant headwinds" due to lower-than-anticipated levels of autumn inventory compared to last year.
"We have come into the first quarter knowing that we have tailwinds, primarily from the lack of cold weather inventory that we had on hand last year," company chairman and CEO Michael Jeffries explained.
"We are anticipating sales losses due to that through the middle of March. We were also very concerned about the macroeconomic situation coming into the first quarter."
However, the company also sees a number of self-help opportunities. It has set up a team that will look at how it can simplify processes to "eliminate low value-added components of our model" to increase efficiencies and lower expenses.
"This initiative is a major corporate priority, and we believe there is a very significant opportunity," Jeffries added.
Abercrombie & Fitch said it is working with a consulting firm on the initiative and expects to be able to give more detail by the end of the first quarter.
The company, which has been trying to improve its fashion offering over the last few years, is cautious about how much of its range should follow a fast fashion model, according to Jeffries.
"We are cautious about how much we're increasing our chase component of speed to market because, as I've said, there is some downside to chase," he explained.
Challenging US retail environment
The comments come after the retailer released its fourth quarter results, in which sales at stores open at least a year, including direct to consumer sales, in the US edged down 1% over the 14 weeks to 2 February.
The decline in US comparable store sales, however, was not enough to dampen Abercrombie & Fitch's overall performance. Indeed, total US sales edged up 1% to $976.4m, while international sales jumped 34% to $492.2m. Direct-to-consumer sales increased 26% to $266.4m.
Commenting on the results, Jeffries said: "Despite a challenging US retail environment over the holiday period, our core US chain plus direct-to-consumer comparable sales remained positive and we saw continued sequential improvement in our international business."
The Ohio-based retailer more than tripled its fourth-quarter profit, driven by a rise in sales from new international stores and lower product costs.
Under the company's new accounting method for inventory, net income reached US$157.2m for the fourteen weeks to 2 February, against $45.8m the same period last year. Net sales were up 11% to $1.47bn, compared to $1.33bn the year before.
"Coming back to 2013, while we anticipate a slow first quarter due to a number of top line pressures, we anticipate another year of earnings growth in line with our long-term goal of annual earnings per share growth of 15% or slightly better," Jeffries added.
Abercrombie & Fitch said it will open its first Hollister store in Dubai, United Arab Emirates this year as part of a joint venture agreement with Majid Al Futtaim Fashion. This will be followed by stores in Abu Dhabi, Kuwait and Qatar in the next few years, Ramsden said.
In 2013, the company also expects to enter the southern hemisphere by opening stores in Australia and Japan.
US clothing retailer Abercrombie & Fitch saw second quarter net income slide on weaker traffic and continued softness in the women's business. ...
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