Teen retailer Abercrombie & Fitch Co. said Friday that first-quarter earnings increased 3.4 percent and predicted that eventually half its business will be international.
For the three months ended May 3, earnings reached $62.1 million, or 69 cents a diluted share, up from $60.1 million, or 65 cents, in the year-ago period. Analysts were expecting earnings of 66 cents a share, but a lower tax rate and stronger gross margins helped to offset weaker same-store sales. Sales for the quarter grew 7.8 percent to $800.2 million from $742.4 million, and total same-store sales fell 3 percent.
By division, comps increased 3 percent at Abercrombie & Fitch, fell 7 percent at the abercrombie kids concept, decreased 8 percent at Hollister, and were down 17 percent at Ruehl.
The gross profit rate was 66.8 percent, a 120 basis point increase driven by higher initial markups and a decrease in lost or stolen merchandise.
The quarterly growth came despite the weak economic environment and slowdown in the retailer's women's and girls' fashion business, particularly in fashion knit tops, the company's largest selling category, chief financial officer Mike Kramer said during a conference call with Wall Street analysts.
"We are benefiting from international tourists traveling to the U.S. to take advantage of a weak U.S. dollar," Kramer said on the call. "We were able to realize this benefit because of our global brand recognition. This is additional proof that there is global demand for our brand, and it gives us further confidence that we can be successful with our international expansion initiatives."
The strength of the international division has led management to forecast that in seven to 10 years, half of Abercrombie's business will be from abroad. It now represents 13 percent of revenues.
The company reaffirmed earnings guidance of $1.61 to $1.65 a diluted share for the first half. The low end of the guidance reflects a 2 percent decrease in same-store sales for the second quarter, management said.
Although analysts were impressed with the success of the existing concepts, new locations and launch of innovative initiatives, they remain doubtful in the short term.
"In the near term, we believe the women's assortment will continue to struggle with a lack of a strong fashion trend and the macro environment will likely remain challenging through much of 2008," said Richard Jaffe, retail analyst at Stifel Nicolaus.
Abercrombie trimmed its 2008 expansion plans to 10 percent square-footage growth from its previous estimate of 11 percent. The company expects to open its second European Abercrombie & Fitch flagship and first Hollister flagship in New York in 2009, and plans to launch its first abercrombie flagship on New York's Fifth Avenue in 2010.
Breaking News: @louisvuitton's men's artistic director @mrkimjones is leaving the French fashion house after nearly 7 years. Jones joined Louis Vuitton in 2011, following a three year tenure as creative director of British luxury goods brand Alfred Dunhill. Jones is to exit Louis Vuitton after showing his fall 2018 collection for the brand in Paris on Thursday. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews