Abercrombie & Fitch Co. led off the fourth-quarter specialty store earnings season with a smaller profit decline than analysts expected and indications that it was getting more aggressive about keeping inventories in check.
Mike Jeffries, chairman and chief executive officer, said on the company conference call Tuesday that even though the retailer doesn’t “ever plan to be a promotionally led business,” it is “getting better at figuring out something that was completely alien” to it 18 months ago.
In the fourth quarter ended Jan. 30, gross margin fell to 63.5 percent of sales, versus year-ago gross margin of 64.5 percent, because of lower average unit retail and unplanned markdowns on spring product that is now slated to go straight to clearance or to outlet stores, according to the company.
“We’ve been through a difficult year, but we firmly believe it was a year in which we laid foundations for future success,” Jeffries said.
Throughout the recession, most analysts have pointed to A&F’s lackluster apparel assortment and high prices as glaring problems for the company, which has lost ground to more value-oriented competitors such as Aéropostale Inc. and the recently resurgent American Eagle Outfitters Inc.
Fourth-quarter profitability was hurt by costs associated with the closure of the 29-door Ruehl concept but still managed to exceed consensus estimates, helping shares to move up $1.40, or 4.1 percent, to $35.25 on Tuesday.
Net income for the New Albany, Ohio-based company dropped 30.6 percent to $47.5 million, or 53 cents a diluted share, compared with $68.4 million, or 78 cents a share, in the year-ago quarter. Stripping out a net loss from discontinued operations and noncash asset impairment charges, the firm reported earnings per share of 91 cents, 4 cents above the consensus estimate of analysts polled by Yahoo Finance.
Quarterly sales slid 4.6 percent to $936 million versus $980.8 million a year earlier. Comparable-store sales declined 13 percent, led by a 19 point drop at Hollister, followed by an 11 percent slide at its kids’ division and an 8 percent pullback at the flagship nameplate.
For the year, the retailer’s net income fell 99.9 percent to $254,000, or break-even on a per-share basis, versus $272.3 million, or $3.05 a share. Revenue declined 15.9 percent to $2.93 billion from $3.48 billion as it contracted 23 percent on a comp basis. On the apparel side, Jeffries said, the men’s business has a “clear identity” and is “performing well,” while the women’s division is making progress.
“Personally, I am more involved in the women’s product, and I am approaching this challenge with renewed energy and enthusiasm for improving this side of the business,” he said.
He cautioned the firm might close underperforming stores to enhance domestic productivity, even as it becomes more aggressive in its pursuit of international growth.
“The story is not a quarterly story, but a longer-term and international story,” said Jennifer Black, president of Jennifer Black & Associates, who noted that international sales could represent more than 50 percent of the business, up from current levels of “just north of 10 percent.”
While Black said this could compensate for the “lack of unit growth in the U.S.,” UBS retail analyst Roxanne Meyer wasn’t impressed by A&F’s results.
“We continue to look for signs of stabilization in the U.S. and greater conviction in the long-term operating model for international, which, while off to a strong start, in our minds isn’t proven yet,” she said.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast