"Consumer spending patterns domestically continue to be dictated by cost and value propositions, and this is clearly a headwind for our premium brands," Chief Executive Michael Jeffries said during a conference call.
The consumer slowdown is forcing Abercrombie, of New Albany, Ohio, to reduce prices after the company has spent much of the economic downturn with premium pricing in place."We are planning to deliver greater reductions in [average retail prices] for the fall season, but we will continue to review pricing on an ongoing basis," Mr. Jeffries said.
For its quarter ended Aug. 1, Abercrombie swung to a loss of $26.7 million, or 30 cents a share, compared with year-earlier income of $77.8 million, or 87 cents a share. Excluding charges, the loss would have been two cents a share, compared with analysts' expectations for a three-cent loss.
Sales fell 23% to $648.5 million. The latest results included $24.4 million in charges related to the high-end Ruehl business, which Abercrombie plans to close.
In 4 p.m. composite trading Friday on the New York Stock Exchange, Abercrombie shares were up $1.29, or 3.9%, to $34.25.
The teen-apparel retailer increasingly has been shedding its no-markdown approach as it looks to clear inventory after seeing same-store sales drop month after month. Its July same-store sales, or those at stores open at least a year, slipped 28%.
The company also has stumbled when it comes to offering compelling merchandise such as dolphin jewelry and plumeria jewelry. "We have admittedly missed some other fashion opportunities that drove the business in the spring," Mr. Jeffries said. "We feel like we have corrected these fashion misses."
Second-quarter gross margin, or the difference between a company's cost of producing products and the price it receives for them, fell to 66.5% from 70.1% because of greater markdowns.
