ABERCROMBIE & FITCH TO LAUNCH HOLLISTER CO. COLLECTION AND STORE

Byline: Vicki M. Young

NEW YORK — Having revived one of the legendary names in retailing, Abercrombie & Fitch is now out to create a new one.
In addition to meeting analysts’ expectations for first-quarter earnings and announcing that it has begun lowering price points, A&F said Tuesday that this summer it will launch, as both a store concept and a label, Hollister Co., a West Coast-oriented lifestyle brand aimed at boys and girls of high school age.
Describing it as “entirely different from Abercrombie,” Mike Jeffries, chairman and chief executive, said price points for Hollister, because of its younger demographic target, are lower than at the A&F stores. “We believe it has the ability to play to a larger audience in terms of the number of stores.” Although Hollister is still in the testing stage, the company is projecting that total store count for the concept could reach as high as 600 to 800. The first five stores are set to open during July and August. A&F currently operates 258 units.
The Hollister team has been in place since August, noted Seth Johnson, executive vice president and chief operating officer. The staff for Hollister numbers between 30 and 40, mostly design and support staff. Although the lifestyle brand will feature a surf element, Jeffries said it won’t be a “surf business.”
Plans were revealed after the close of the market, as the company said it met first-quarter consensus of 16 cents in earnings per share. The earnings whisper for the quarter had been 17 cents. A&F reported $16.2 million in net income for the quarter ended April 29, or 16 cents, compared with $15 million, or 14 cents, in the comparable year-ago period. Sales increased 10 percent to $206.6 million from $188.3 million, but same-store sales declined 8 percent.
Shares of the company closed Tuesday at 12 1/4, up 3/8 and above its 52-week low of 9 11/16, on the New York Stock Exchange. However, the stock dipped slightly, dropping to 10 7/8 in early after-hours trading following the firm’s quarterly report.
Looking ahead, Jeffries said second-quarter earnings per share will be between 16 cents and 18 cents. The current forecast by analysts is 21 cents, compared with the 17 cents earned last year for the period. Jeffries also said earnings will increase “10 to 20 percent for the fall season,” compared with the 1999 period.
It was a less cantankerous Jeffries than had participated in the last two quarterly conference calls on the company’s earnings. “I had allowed some price points to creep too high,” he said. “For back-to-school, we’re very much on track to where this brand should be. In many cases, the price was just too high for the brand. In some cases we reached the price point of Ralph Lauren, and that’s too high for this business.”
The men’s business has been performing as expected, but women’s remains a sore point for A&F. “We have gone through a difficult time in the women’s business,” Jeffries commented. “I believe that back-to-school is a very exciting assortment, much of which has been tested…. We are trending very well for fall and [won’t] need extraordinary surgery.”
Although A&F had parents seeing red because of the blue language and sexual content in its holiday “Naughty or Nice” magalog, Jeffries noted that the feminine take on fashion for back-to-school is not about “overt sexuality,” but just a more feminine touch.
Looking at A&F’s overall performance, the two executives noted that the company has had 30 percent earnings growth since going public in 1996. But they added that “at this level of productivity,” A&F is not likely to hit a target as high as 25 percent.
A&F also said that it would begin to report monthly sales starting on June 1.