NEW YORK (Feb. 13) - Teen retailer Abercrombie & Fitch Co., which resisted the steep discounts its competitors offered during the holiday season, said Friday its fourth-quarter profit slid 68 percent as sales slumped.
Adjusted results beat analyst expectations, however, and the company's shares jumped 13 percent. Abercrombie also said it was trying to cut costs and hinted that it was being a bit more flexible about prices.
The company said it used clearance markdowns during and after the weak holiday season to move seasonal merchandise and it lowered some prices at its Hollister stores and abercrombie children's stores.
Still, Chairman and Chief Executive Mike Jeffries said even in the weak economy Abercrombie will not be offering deals at the same level as its competitors.
"We are not promotional, and by promotional I mean 50 percent off a category or buy one get 17 free, somebody whispering to you about a secret sale. We don't do stuff like that," Jeffries said in a conference call with investors. "We do take clearance markdowns as a natural rhythm of the business and we're strategic about how we take markdowns."
While rivals such as Aeropostale Inc. and American Eagle Outfitters Inc. have increasingly focused on offering customers discounts, Abercrombie has stuck to its strategy of keeping prices relatively high to protect its brand. It has also invested in international growth to position itself better for when the economy recovers.
In the meantime, however, its results have suffered. For the quarter ended in January, Abercrombie earned $68.4 million, or 78 cents per share, down from $216.8 million, or $2.40 per share, a year earlier.
Excluding impairment charges and a tax expense, net income came to $1.10 per share, beating analyst expectations for $1 per share. Analyst estimates typically exclude one-time items.
The company had said in November it expected to earn between $1 and $1.05 per share, excluding one-time items.
Sales fell 19 percent to $998 million from $1.29 billion, just topping the $997.7 million that analysts expected. Same-store sales, or sales in stores open at least a year, fell 25 percent during the quarter, reflecting declines at all three of the company's divisions: Hollister Co., Ruehl, and its namesake.
Men's fashions, including denim, knit tops and fragrance have been performing better than women's fashion, the company said. Men's same-store sales fell in the low teens while women's declined in the 30s percentage range.
Abercrombie said it is continuing to review its cost structure and it is cutting costs in an effort to offset slumping sales.
It set a capital budget for 2009 of $165 million to $175 million for store openings and remodelings, and upgrades for information technology, among other projects.
The company plans to open 10 stores across its brands in 2009 in the U.S. and at least 2 Hollister stores internationally, with 10 other Hollister stores likely to open in Europe in 2009.
The company is focusing on opening Hollister stores in Britain and elsewhere in Europe because the stores have gotten a strong response, Jeffries said.
Standard & Poor's analyst Marie Driscoll kept her "Hold" rating on the stock.
British same-store sales "are surpassing (the) NYC flagship, which remains vibrant," she wrote. "International expansion is (the) fiscal 2010 priority, along with controlling expenses, brand positioning."
The company did not give guidance due to the continuing "tumultuous environment" in the retail sector.
Its shares jumped $2.75 to $23.45 in midday trading. They have traded between $13.66 and $82.66 during the past year.
