Abercrombie profit falls on weak sales

Bright spot was direct-to-consumer sales, including Web sales, which rose 11 per cent

Preppy clothing seller Abercrombie & Fitch Co.’s ANF-N third-quarter profit fell 39 per cent as sales continued to be weak and the company worked to close its higher-priced Ruehl line, the company said Friday.

Abercrombie & Fitch has seen sales slump and lost market share to lower-priced competitors such as Aeropostale Inc. It has kept prices high and kept investing internationally amid the recession.

Still, results were better than expected and shares rose 5 per cent in premarket trading.

Profit for the three months ending Oct. 31 fell to $38.8-million (U.S.), or 44 cents per share, from $63.9-million, or 72 cents per share last year. Excluding charges related to closing Ruehl and a tax benefit, profit was 30 cents per share.

That beat analysts’ average expectations of 20 cents per share, according to a Thomson Financial poll.

Revenue fell 15 per cent to $765.4-million, from $896.3-million, squeaking past analyst expectations of $764.5-million.

Sales in stores open at least one year, a key measure of a retailer’s health, dropped 22 per cent. That includes a 18-per-cent drop at namesake stores, a 22 per cent drop at abercrombie children’s apparel stores, and a 26 per cent drop at its surf-themed Hollister stores.

Sales at Ruehl stores open at least a year fell 30 per cent. The company said it expects the closing of the chain, expected by the end of the year, to cost $60-million, $5-million less than originally anticipated. About $33.7-million of that was recorded in the first half of the year.

One bright spot for Abercrombie was direct-to-consumer sales, including Web sales, which rose 11 per cent to $63.9-million.

The company, based in New Albany, Ohio, cut marketing, general and administrative expenses by 16 per cent, to $88.1-million from $105-million.

It continued to expand internationally, opening Abercrombie & Fitch and abercrombie flagship stores in Milan and two Hollister mall stores in the U.K.

It plans to open a flagship store in Tokyo in December and five Hollister mall-based stores in Europe in the fourth quarter. In fiscal 2010, the company expects to open Abercrombie & Fitch flagship stores in Copenhagen, Denmark; and Fukuoka, Japan.