Teen clothing retailer retailer Abercrombie & Fitch Co has posted a sharp decline in third quarter earnings, and says it is taking steps to control expenses as consumers pull back their spending.

The New Albany, Ohio based retailer, which operates its namesake stores as well as the Abercrombie, Hollister Co, Ruehl and Gilly Hicks nameplates, said it has cut store payroll hours and home-office expenses, and that capital expenditures for the year will be $15m below earlier forecasts.

For the three months to 3 November, net income tumbled 46% to $63.9m, or $0.72 per share, from $117.6m, or $1.29 per share, a year earlier.

Net sales fell 8% to $896.3m from $973.9m last time, with same-store sales dropping 14% - dragged down by decreases at all its chains.

Comparable store sales at Abercrombie & Fitch slipped 8%, at the Abercrombie children's wear concept decreased 20%, at Hollister Co were down 18%, and at Ruehl, which targets older graduates, fell 25%.

Total direct-to-consumer sales decreased 6% to $57.5m.

Mike Jeffries, chief executive officer and chairman of the board said that despite a difficult economic environment the company is committed to "investing in initiatives that will allow us to continue the international expansion of our brands."

Higher markdowns meant the gross profit rate for the quarter was 66.0%, down 20 basis points compared to last year.

The company also reduced its store payroll hours and home office expense in response to declining sales.

However, stores and distribution expense, as a percentage of sales, increased 660 basis points to 43.1% from 36.5% and marketing, general and administrative expense, as a percentage of sales, increased 100 basis points to 11.7% from 10.7%.

For the fourth quarter of fiscal 2008, net income per share is expected to be in the range of $1.00 to $1.05, with same store sales down 26%.

For the fiscal year, net income per share is likely to be in the range of $3.27 to $3.32, the company said. This compares with $5.20 per share last year.

The company now plans total capital expenditures for the year to be between $390m and $395m, down from earlier estimates of between $405m and $410m.

As well as 94 new non-flagship stores in the US, and three Hollister Co stores in the UK in fiscal 2008, there are plans for flagship locations around the world in 2009.

This will include a Hollister flagship in New York, Abercrombie flagships in New York and Milan, and Abercrombie & Fitch flagships in Copenhagen, Milan and Tokyo.