Fewer sales at flagship and tourist locations hurt Abercrombie & Fitch’s second-quarter results, pushing the retailer to a wider net loss and a 4 percent drop in comparable-store sales.
For the three months ended July 30, the net loss was $13.1 million, or 19 cents a diluted share, compared with a net loss of $810,000, or 1 cent, a year ago. On an adjusted basis, the net loss on a diluted share basis was 25 cents. Net sales fell 4.2 percent to $783.2 million from $817.8 million. Consolidated comps were down 4 percent, with the Abercrombie brand falling 7 percent and Hollister slipping 2 percent.
Wall Street was expecting an adjusted loss of 20 cents a diluted share on revenues of $782.7 million.
Arthur Martinez, executive chairman, said, “Our results for the quarter were largely in line with the expectations we set on last quarter’s earnings call. Flagship and tourist locations continued to account for the vast majority of the comparable sales decline as traffic remained a significant headwind.”
Martinez said the company saw growth in the direct-to-consumer business, both domestically and internationally, and a comp sales recovery in the Hollister European business. The company said direct-to-consumer sales grew to about 23 percent of total company net sales for the quarter.
For the quarter, the company began to roll out marketing and merchandising programs that reflect the new brand positioning for both its Abercrombie and Hollister brands.
“As we look to the rest of the year, we now expect flagship and tourist locations will continue to weigh on the business,” Martinez said, adding that the company expects to see traction in its business as it introduces “new product and invests in marketing to drive awareness and relevance for our brands.”
For fiscal 2016, the company said it expects comp sales to remain challenging through the second half, with a “disproportionate effect from flagship and tourist locations.”
In the conference call to Wall Street analysts, Fran Horowitz, president and chief merchandising officer, said the company saw a “nearly 60 percent increase over last year in sales generated from orders placed on mobile devices.” She also spoke of the firm’s presence on social media, noting that across the brands, the company has more than 20 million Facebook fans and seven million Instagram followers, or more than 30 percent above last year, and an average more than 120 million impressions and more than two million engagements every month. “We continue to be active on Snapchat where our follower base increased 20 percent from last year.”
She said the company rolled out a Hollister clubs loyalty program in June and sees further opportunities to use the program to improve and personalize the customer experience.
Abercrombie recently inked a wholesale deal with Zalando to sell select products on the sites of the European e-tailer.
Shares of Abercrombie on Tuesday fell 20.3 percent to close at $18.29 in Big Board trading.