Growing pains at Abercrombie & Fitch nearly tripled its first-quarter loss from a year ago.
For the three months ended May 2, the net loss was $63.2 million, or 91 cents a diluted share, from a net loss of $23.7 million, or 32 cents, last year. Net sales were down 13.7 percent to $709.4 million from $822.4 million. Comparable-store sales at Abercrombie slipped 9 percent, while comps at Hollister were down 6 percent.
Wall Street was expecting a loss of 34 cents a share on sales of $730.9 million.
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The company has been pulling back in order to grow again. It has been closing stores, changing its product assortment to include more fashion, and began dipping its toes into wholesaling after Arthur Martinez joined the company as chairman in January 2014.
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Martinez said, “During the quarter, the company continued to take major strides to revitalize its brands, enhance performance and position itself for a return to profitable growth.
He noted that the company is still in the early stages of implementing some of its strategic initiatives that haven’t yet been fully realized. The chairman also noted that the company is starting to see some sequential improvement in certain areas, a trend that has continued in May.
The company is projecting that it will continue to see sequential comps improvement into the second quarter and second half of the fiscal year.
A company executive said improved product mix is beginning to get some traction, hence the sequential improvement in comps. The company has added some senior level staff members to work with its brand presidents to oversee design and merchandising. “We expect more improvement in the back half as we get more confident with our product assortment,” this individual said.
Investors liked what they heard about the improving comps and the expectation of that continuing in the back half of the year, sending shares up 10.1 percent to $21.64 in late-morning trading.
In other changes, the company has been working on making the shopping experience more consumer-focused, and will continue to focus on omnichannel. Also changing the mix will be more wholesaling, which Martinez spoke about a year ago. The Abercrombie brand sells on Asos.com, and sales of the Hollister brand will begin on the site during the current quarter.
Abercrombie will also close about 60 stores this year through natural lease expirations.