ABERCROMBIE & FITCH NET BEATS ESTIMATES
Byline: Jennifer Weitzman
NEW YORK — Abercrombie & Fitch reported a slight increase in fourth-quarter earnings and beat Wall Street projections by two cents.
Net income for the 354-unit youth-oriented casualwear retailer rose 1 percent to $439.4 million, or 76 cents a share, for the three months ended Feb. 3. That compares with earnings of $76.7 million, or 73 cents in the year-ago period. Sales increased 21 percent to $439.4 million from $363.7 million but declined 9 percent on a same-store basis.
“The entire organization responded to the challenge and our tight control of expenses allowed us to protect the bottom line,” Mike Jeffries, chairman and chief executive, said in a statement.
The earnings report came after the close of the markets Tuesday. Shares of the company fell $2.44 to $27.90 on the New York Stock Exchange.
On a conference call, Jeffries said although he was pleased to report improved earnings, the rough retail environment limited its potential. “No question, this past holiday season was the most difficult sales environment we have faced.”
In light of the challenges, the company’s quarter reflects “our strong commitment to protect and improve the bottom line,” he said.
He noted that women’s apparel continues to gain momentum, with positive comp-store increases, as the company shifted to a more sexy feminine look. He said strength has been across a broad spectrum including sweaters, denim and outerwear.
Jeffries said new categories — including innerwear, gymwear and its new fragrance — have trended well. Sales in these areas exceeded plans in December and provide a strong base to increase the business.
On the men’s side, Jeffries said the business remains more challenging because the division is faced with difficult comps from last year’s successes with parachute pants and graphic T-shirts.
For the year, net income increased 6 percent to $158.1 million, or $1.55 a share, from an adjusted $149.6 million, or $1.39, last year. Net sales increased 20 percent to $1.24 billion from $1.03 billion. Comparable-store sales decreased 7 percent.
Seth Johnson, A&F’s chief financial officer, said on a conference call the company ended the quarter with its inventory up 23 percent, reflecting the 53-week year, a week further into spring selling season. Excluding the extra week, inventory was up 16 percent and without the new women’s categories, up 10 percent. He added the company has made “significant investment” in the new women’s categories.
For the quarter, SG&A (selling, general and administrative) expenses were 17.9 percent of sales, an increase of 150 basis points. The company added 29 new stores and said the bulk of its spending is behind it. The company plans to open 130 new stores during the new fiscal year and plans to open its new office facility and distribution center in March.
Its Internet division saw sales triple and significant improvements in its operational performance reduced its back orders and cancellations.
Johnson said the company expects flat earnings during the first half and double -digit growth in the second.
Looking ahead, Jeffries said that, while he is optimistic about its spring merchandise assortment, the company is “taking a very cautious approach to the business in 2001” due to the uncertain economic environment.
The quarter was the 34th consecutive quarter of record sales and earnings for A&F.