Teen apparel retailer Abercrombie & Fitch Co. (ANF) on Wednesday reported a loss for the second quarter, reflecting lower revenue and operating margins as well as one-time charges.
However, both revenue and adjusted earnings per share for the quarter beat analysts' expectations. The company's shares are gaining almost 15 percent in pre-market trades.
Arthur Martinez, executive chairman of Abercrombie & Fitch said, "In our second quarter, we delivered a meaningful sequential improvement in comparable sales, stabilized gross margins and achieved significant expense reductions. Our results exceeded what we signaled in our first quarter earnings call and give us confidence that we are on the right track, although we recognize that we still have much to achieve."
The New Albany, Ohio-based retailer's net loss for the second quarter was $0.81 million or $0.01 per share, compared to net income of $12.88 million or $0.17 per share in the prior-year quarter.
Results for the latest quarter include net charges of $0.13 per share, while the year-ago quarter included $0.02 per share of net charges.
Excluding items, adjusted net income for the quarter was $8.60 million or $0.12 per share, compared to $14.06 million or $0.19 per share in the year-ago quarter. The reduction included an adverse impact from changes in foreign currency exchange rates of about $0.18 per share.
On average, 31 analysts polled by Thomson Reuters expected the company to report loss of $0.04 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter declined 8 percent to $817.76 million from $890.61 million in the same quarter last year, but beat analysts' consensus estimate of $811.46 million.
The decrease in sales reflects a 4 percent decline in comparable sales and a 5 percent unfavorable impact of foreign currency exchange rates.
However, the company noted that sequential improvements in comparable sales trends were driven largely by Hollister and abercrombie kids, and internationally. The company said it made good progress in Hollister and abercrombie kids during the quarter, but more modest progress at Abercrombie & Fitch.
U.S. sales, including direct-to-consumer sales, declined 6 percent to $514.5 million, and international sales, including direct-to-consumer sales, also decreased 12 percent to $303.2 million.
Gross margin improved 20 basis points to 62.3 percent, while operating margin contracted 200 basis points to 0.2 percent.
Looking ahead to the second half of fiscal 2015, Abercrombie & Fitch expects further improvement in comparable sales trends, skewed towards the fourth quarter, and continued headwinds from foreign currency exchange rates.
The company also expects an elevated tax rate on a full-year basis, which remains highly sensitive to earnings mix by jurisdiction.
The company plans to open 15 full-price stores in fiscal 2015 in the key growth markets of China, Japan and the Middle East, six full price stores in North America, and 10 new outlet stores in the U.S. It also plans to close about 60 stores in the U.S. during the fiscal year through natural lease expirations.
ANF closed Tuesday's trading at $17.27. In Wednesday's pre-market activity, the stock is up $2.53 or 14.65 percent to $19.80.
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