Abercrombie & Fitch Shares Tumble 13% Following Weak Earnings, Outlook

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August 30, 2016 8:20am NYSE:ANF

Clothing retailer Abercrombie & Fitch Co. (NYSE:ANF) posted weaker-than-expected Q2 results this morning and offered a tepid outlook, sending its shares plunging in premarket trading.


The New Albany, OH-based company reported a Q2 adjusted net loss of $0.25 per share. Analysts had expected a smaller loss of $0.21. Revenue fell 4.2% from last year to $783.20 million, but beat Wall Street expectations.

The real story from the report was ANF’s softened guidance, however. The company said it now expects “comparable sales to remain challenging through the second half of the year, with a disproportionate effect from flagship and tourist locations.” Comparable sales, also known as same-store sales, are perhaps the most important measure of a brick-and-mortar retailer’s performance, since they measure only the results of stores open at least one year.

ANF also expects gross margins to be flat from last year’s adjusted rate of 61.9%, but down in Q3 due to foreign currency effects.

From the press release:

Arthur Martinez, Executive Chairman, said: “Our results for the quarter were largely in line with the expectations we set on last quarter’s earnings call. Flagship and tourist locations continued to account for the vast majority of the comparable sales decline as traffic remained a significant headwind. We were encouraged, however, by strong growth in the direct-to-consumer business, both domestically and internationally, and by a comparable sales recovery in the Hollister European business, including in the U.K. In addition, conversion trends were positive in both channels, across brand and geography. Overall, we remained disciplined as gross margin rate was substantially maintained on a constant currency basis and expense and inventory were tightly controlled.

This quarter we began to roll out programs that reflect our new brand positions for both Abercrombie and Hollister. We look forward to strengthening our brands as we express these positionings across all customer touch points.

As we look to the rest of the year, we now expect flagship and tourist locations will continue to weigh on the business. Recognizing we are in a challenging environment, we are confident, however, that we are focusing on the right priorities and we expect to see traction in our business as we introduce new product and invest in marketing to drive awareness and relevance for our brands.”

ANF-2016-08-30

Abercrombie & Fitch shares tumbled $3.01 (-13.12%) to $19.94 in premarket trading Tuesday. Prior to today’s report, ANF had lost about 15%, versus a 7% gain in the benchmark S&P 500 during the same period.


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