Tuesday, May 17, 2011

Abercrombie & Fitch Co. (NYSE: ANF): Q1 Earnings Preview 2011

Abercrombie & Fitch Co. (NYSE: ANF) is scheduled to release first-quarter earnings before the opening bell on Wednesday, May 18, 2011. Analysts, on average, expect the company to report earnings of 12 cents per share on revenue of $825.64 million. In the year ago quarter, the company reported a loss of 13 cents per share on revenue of $687.80 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 the first quarter, the Company operated a total of 1,071 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, 40 Hollister Co. stores and one Gilly Hicks store internationally.  

In the preceding fourth-quarter, the New Albany, Ohio-based company's net income was $92.59 million, or $1.03 a share, compared to $47.46 million, or 53 cents a share, in the year-earlier quarter. On an adjusted basis, the company earned $1.38 per share in the fourth quarter. Revenue climbed 23 percent to $1.149 billion from $935.99 million. Analysts, on average, expected the company to report earnings of $1.32 per share on revenue of $1.14 billion.

The company has cut prices to lure shoppers and increase market share in highly competitive apparel market. The company has benefited from aggressive promotions. 
The teen retailer's biggest strengths recently have been in direct-to-consumer sales - chiefly online - and international sales. 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 first quarter. Early in May, the company reported net sales of $836.7 million for the fiscal quarter ended April 30, 2011, a 22% increase from net sales of $687.8 million for the fiscal quarter ended May 1, 2010. U.S. sales, including direct-to-consumer sales, increased 13% to $641.0 million. International sales, including direct-to-consumer sales, increased 64% to $195.7 million. Total Company direct-to-consumer sales, including shipping and handling, increased 32% to $105.8 million. Total comparable store sales for the quarter increased 10%. By brand, comparable store sales increased 8% for Abercrombie & Fitch, increased 11% for abercrombie kids, and increased 11% for Hollister Co. Within the quarter, April was very strong, including the effect of the calendar shift of the Easter holiday.

Abercrombie & Fitch plans to grow earnings to $4.75 per share in fiscal 2012 (ends January 2013). Abercrombie & Fitch also expects to reach sales in fiscal 2015 of $7.5 billion. Abercrombie & Fitch is counting on better growth opportunities overseas, and will invest in increasing the number of International Flagship stores and Hollister locations in Asia and Europe. Abercrombie & Fitch currently has five International Flagship stores open, including two in Asia and three in Europe. During the current fiscal year, the company plans to double this store base, with locations in Paris, Madrid and several other select cities. Abercrombie & Fitch plans some aggressive expansion here over the next few years with a long-term goal of approximately 30 stores. Another area of growth for Abercrombie & Fitch is in its Hollister brand in Europe. The company currently has 29 stores in four countries and has a long-term goal of increasing its store count to 185 across 15 countries. 

However, Abercrombie & Fitch is planning to shrink its store base in the United States and will close 50 locations during the current fiscal year. The company will also work to increase its U.S. store productivity with a goal of 90% of 2007 levels by 2012.

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