Thursday, February 10, 2011

Abercrombie & Fitch Co. (NYSE: ANF): Q4 Earnings Preview 2010

Abercrombie & Fitch Co. (NYSE: ANF) is scheduled to release fourth-quarter earnings before the opening bell on Wednesday, February 16, 2011. Analysts, on average, expect the company to report earnings of $1.32 per share on revenue of $1.14 billion. In the year ago quarter, the company reported earnings of 91 cents per share on revenue of $935.99 million.

Abercrombie & Fitch Co., through its subsidiaries, operates as a specialty retailer of casual apparel for men, women, and kids. Abercrombie & Fitch Co. (A&F) through its subsidiaries, is a specialty retailer that operates stores and direct-to-consumer operations. At the end of fiscal 2010, the company operated a total of 1,069 stores. The Company operated 316 Abercrombie & Fitch stores, 181 abercrombie kids stores, 502 Hollister Co. stores and 18 Gilly Hicks stores in the United States. The Company also operated nine Abercrombie & Fitch stores, four abercrombie kids stores, 38 Hollister Co. stores and one Gilly Hicks store internationally. 

In the preceding third-quarter, the New Albany, Ohio-based company's net income was $50 million, or 56 cents a share, compared to $38.8 million, or 44 cents a share, in the year-earlier quarter. Revenue climbed 18% to $885.8 million from $753.7 million. Analysts, on average, expected the company to report earnings of 51 cents per share on revenue of $881.26 million.

The company has cut prices to lure shoppers and increase market share in highly competitive apparel market. The company has benefited from aggressive promotions. However, few analysts fear that higher-than-usual discounting coupled with aggressive promotions could put pressure on margin.

The teen retailer registered robust comparable store sales growth during the third quarter. Comparable store sales increased 13% for the quarter. For the fiscal quarter ended January 29, 2011, the Company reported net sales of $1.149 billion, a 23% increase from net sales of $936.0 million last year.  

The teen retailer's biggest strengths recently have been in direct-to-consumer sales - chiefly online - and international sales. For the fourth quarter, total company direct-to-consumer net merchandise sales increased 43% to $133.4 million. For the quarter, total Company international net sales, including direct-to-consumer net sales, increased 61% to $230.3 million.

As a result of its fiscal year-end review of long-lived store-related assets, the company expects to record an impairment charge for the quarter. The charge will include a substantial portion of the approximately $58 million net book value associated with Gilly Hicks stores, as well as certain other store-related assets. The Gilly Hicks charge relates to the stores constructed using the original large format store of around 10,000 gross square feet. The Company expects that future stores will be constructed using the new smaller format of approximately 5,000 gross square feet. In addition, for the fiscal quarter ended January 29, 2011 the company expects to record exit charges associated with the closure of 56 domestic stores during the quarter. These closures are in addition to the 8 permanent closures that occurred in prior quarters during the fiscal year. Fourth quarter net pre-tax charges associated with these closures are expected to be approximately $4 million, primarily related to lease obligations.

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