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Wednesday, August 20, 2008

Abercrombie Posts 4.2% Drop in Profit

Abercrombie & Fitch Co. said its fiscal-second-quarter profit fell 4.2%, hurt by consumers cutting back on discretionary purchases, and the teen retailer gave a weaker-than-expected full-year outlook.

Abercrombie sales have been curtailed by a slowdown in mall traffic and by consumers who have curbed spending or turned to lower-cost rivals such as Aeropostale Inc., analysts said.

"The selling environment, particularly as we moved into the back-to-school selling period, was tough," Abercrombie Chief Executive Michael Jeffries said on a conference call Friday.

Net income in the quarter ended Aug. 2 fell to $77.8 million, or 87 cents a share, from $81.3 million, or 88 cents, a year earlier. The latest results included a penny-a-share charge related to the departure of Chief Financial Officer Michael Kramer to become CEO of apparel maker Kellwood Co.

Sales rose 5.1% to $845.8 million. Comparable-store sales, or sales at stores open at least one year, dropped 4%.

In 4 p.m. New York Stock Exchange composite trading Friday, Abercrombie's shares rose two cents to $52.59.

The New Albany, Ohio, company, which owns a couple women's designer apparel and women's discount apparel stores, forecast full-year profit of between $4.95 and $5 a share, with the low end of the outlook reflecting a 7% decline in same-store sales. That fell below analysts' average estimate of $5.36 a share.

The company, which has expanded into international markets such as London as U.S. growth slows, said it plans to open stores in Milan, Italy. "Given our results to date, we are absolutely convinced that international expansion will drive long-term, top-line and bottom-line growth while further enhancing our brands," Mr. Jeffries said.

Abercrombie plans capital spending this fiscal year of between $405 million and $410 million, mostly for store openings and remodels. It plans to increase gross square footage by about 9% to 10% this fiscal year.

By: Andria Cheng
Wall Street Journal; August 16, 2008