Abercrombie & Fitch Shares Plunge On Poor 1Q Results

Abercrombie & Fitch Co.

announced a narrower net loss for the first quarter despite 3 percent drop in the top line hurt by 4 percent drop in comparable store sales. Its adjusted loss also failed to meet the Street analysts' expectations. As a result, the shares tanked more than ten percent in the pre-market trading. Abercrombie & Fitch reported a net loss attributable of $39.6 million or a loss of $0.59 a share for the first quarter, narrower than a net loss of $63.2 million or a loss of $0.91 a share in the year-ago quarter. On an adjusted basis, its loss per share would have been $0.53. Street estimated a loss of $0.51 a share. The company's net sales fell 4 percent to $685.5 million with comparable sales for the first quarter down 4%. Analysts expected revenue of $710.26 million. Abercrombie & Fitch Executive Chairman, Arthur Martinez, commented: "Our results for the quarter reflect significant traffic headwinds, particularly in international markets and in our U.S. flagship and tourist stores, resulting in negative comparable sales. However, in the face of these headwinds, we were encouraged by our U.S. business, where comparable sales improved in the Hollister brand, and gross margin rate increased meaningfully for both brands. Overall, our business remains well managed in these challenging times, with our assortment and customer-centricity efforts driving improved conversion, and expense and inventory well controlled." He added, "We expect the second quarter to remain challenging, but to see better results in the back half of the year as our assortments continue to improve and we see returns from significant investments in marketing, store management and omnichannel. In addition, with the new brand presidents and other key roles now filled, we have a strong team in place to drive our brands forward and capitalize on the many opportunities we see ahead of us." Going forward, Abercrombie & Fitch expects comparable sales to remain challenging in the second quarter, but to improve in the second half of the year. Similarly, it expects unfavorable impact from foreign currency on sales of approximately $10 million and on operating income of approximately $15 million, including the year-over-year impact from hedging. Shares of the company dropped 10.65 percent on Thursday.