A & F posts Q2 profit but stores to close
19 August 2010 09:38
Abercrombie & Fitch has posted a bigger-than-expected profit in its second quarter but has simultaneously announced plans to close 60 of its stores. The retailer reported inventory up by 47% on a per-square-foot basis and margins continued to fall as the company resorted to discounting. The increase in inventory is a potential worry for some investors, with most retailers reducing held stock levels in times of economic austerity, but A&F have insisted the inventory levels are necessary in order to cover potential demand over the coming months.
The company has been forced to significantly increase its markdowns as shoppers stayed away. The average unit retail price was around 15% lower in the second quarter than a year earlier although this was partially offset by lower sourcing costs.
For the quarter to July 31st, profits came in at $19.5 million compared with a year earlier loss of $26.7 million. Revenue improved by 17% to $745.8 million, with same store sales rising 5% overall. International sales rose by 85% to $133.2 million.
The group is planning to close 60 domestic stores this fiscal year and is also planning to cut its international growth plans for the Hollister chain by 20%. In the UK, Abercrombie will open its first international Gilly Hicks store in the fourth quarter.
"We achieved growth both domestically and internationally during the quarter. We are gaining traction and are very excited by what we see ahead of us," commented chief executive officer and chairman Mike Jeffries.
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