Abercrombie & Fitch Gives Huge Profit Warning

Abercrombie

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Teen retailer Abercrombie & Fitch cut its full year forecasts after same-store sales deteriorated in its second quarter.Click here for updates >

Abercrombie now expects full year earnings of $2.50 to $2.75, a full dollar before earlier guidance.

International sales, the key driver of Abercrombie’s recent growth, dove 26 per cent during the period, weighing on results. 

Meanwhile, sales in the U.S. declined five per cent.

“Macroeconomic conditions remained very challenging during the quarter, particularly in Europe but also increasingly in the U.S.,” Chief Executive Mike Jeffries said. “In that context, we will continue to be highly disciplined in our new store approval process and only commit to stores where we are confident they are likely to generate a stronger return than alternative uses of cash.”

Jeffries noted that the company’s international stores are substantially more profitable on a per-unit basis, as its Abercrombie and Hollister brands can often mark up items internationally. 

However, those macroeconomic issues are forcing the company to slow its global expansion. Abercrombie now expects to open 30 Hollister stores this year, roughly 25 per cent lower than earlier guidance.

The company said it tallied sales of $951.4 million during its second quarter.

Abercrombie also expects to earn between $0.15 and $0.18 a share when it reports results on August 15. That was substantially below forecasts for second quarter earnings of $0.32 per share.

Shares are down more than 15 per cent in after hours trading.

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