Reuters: Global Markets: Abercrombie CEO says sales stabilize, stock jumps

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Abercrombie CEO says sales stabilize, stock jumps Aug 15th 2012, 14:38 By Phil Wahba Wed Aug 15, 2012 10:38am EDT (Reuters) - Teen clothing retailer Abercrombie & Fitch Co (ANF.N) reported quarterly profit slightly above its recent limp forecast, and its chief executive said sales trends have improved slightly, sending shares up more than 10 percent. Abercrombie, which earlier this month said sales at stores open at least a year fell 10 percent during the second quarter, also froze new international flagship projects - very large stores put in high traffic spots - and said it will slow the build-up of merchandise inventory. The chain has lost shoppers to competitors American Eagle Outfitters Inc (ANF.N), Aeropostale Inc (ARO.N) and Gap Inc (GPS.N) in the last year and struggled to offer compelling merchandise. That has sparked a drop in same-store sales and disappointing results at its flagships stores designed to anchor an ambitious international expansion. A mark-down in unsold merchandise hurt profits. But CEO Mike Jeffries told a conference call that sales trends have improved in recent weeks, pointing to "at least a stabilization" after a disastrous quarter. He added that inventory would rise at a slower clip than sales for the rest of the year. Jeffries also said the company put new flagship undertakings on hold and was scaling back projects such as smaller stores in Dublin and Seoul. "Cannibalization has clearly been a factor as our brands have become more widely available in Europe," Jeffries said, pointing to the London Abercrombie & Fitch flagship that has been devastated by Europe's slow economy and the chain's expansion. Shares rose nearly 11 percent to $35.87, but remain well below the 52-week high of $77.47 hit last October. MAY BUY BACK MORE SHARES Abercrombie is raising its share buyback authorization by 10 million shares to 22.9 million - just over one-quarter of its outstanding shares. Analysts had expected the move, which could in theory boost the share price. But finance chief Jonathan Ramsden said the company, which did not buy back any shares in the second quarter, would wait for sales trends to stabilize before repurchasing any stock. The company earned $15.5 million, or 19 cents per share, in the second quarter ended July 28, down from $32 million, or 35 cents per share, a year earlier. Two weeks ago, it forecast profit of 15 cents to 18 cents per share, roughly half of what analysts estimated at the time. It also slashed its full-year profit forecast. Overall quarterly sales rose 4 percent to $951.4 million, largely because of having more stores. Sales at stores open at least a year, or same-store sales, dropped 11 percent for Abercrombie & Fitch, 10 percent for abercrombie kids, and 10 percent for Hollister, the company's largest brand by sales. For the year, Abercrombie reiterated its August 1 earnings forecast of $2.50 to $2.75 per share. It sees same-store sales falling 10 percent in the second half, which will include the back-to-school and holiday seasons - the two busiest periods for clothing chains. (Reporting By Phil Wahba; editing by Jeffrey Benkoe and John Wallace) Link this Share this Digg this Email Reprints

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