Abercrombie & Fitch announces very poor earnings

Abercrombie & Fitch announced very disappointing second quarter earnings last Thursday, with a 33 percent drop in profits – mainly due to weak consumer demand.

The total revenue for the clothing company giant dropped by 1 percent to $945.7 million.

Soon after the figures were made public, nearly 20% of the company’s stock was sold off and its share value dropped by 8 percent ($8.27) to $38.53.

Abercrombie & Fitch earned $11.4 million, or 14 cents a share in Q2 2013, compared to  $17.1 million, or 20 cents a share in 2012.

Total U.S. sales slipped 8% to $597.3 million while international sales increased 15% to $348.4 million.

However, A&F is not on its own as same-store sales dropped by 7%. The whole teen apparel market is seeing poor second quarter results.

Aeropostale Inc. revealed that its second-quarter revenue went down by 6% to $454 million.

CEO of Aeropostale Inc., Robert Hanson, said: “We are committed to turning our business around and remain focused on shifting brand perception and recapturing market share.”

CEO of A&F, Mike Jeffries said: “The second quarter was more difficult than expected due to weaker traffic and continued softness in the female business, consistent with what others have reported.”

However, ‘despite the challenging environment’ the company is extremely pleased and confident about the very strong and continued growth in China – a whole new market for the company.

Mr. Jeffries added that the company has managed to make excellent progress on their profit improvement initiative during the quarter, and they are expecting savings from this initiative to exceed $100 million annually.

“In addition, we are nearing completion of our long-term strategic review, and we are confident that this will provide us with a clear roadmap for sustainable growth in sales, profitability and return on invested capital.”

RBC Capital Markets analyst Howard Tubin, said that there may be hope for the teen apparel market though:

“Teen retail is NOT for the faint of heart.We continue to believe as we move through August and into September, traffic will build as the weather cools and we get further into the season. However, competition is intense, promotions are aggressive, and in our view, the assortments at don’t offer significant newness or differentiation.”

To listen to the Q2 2013 Abercrombie & Fitch Co. Earnings Conference Call click here.