In a dour end to Abercrombie & Fitch Co.'s difficult week, the teen retailer watched its stock slide by the largest margin in months after it reported a double-digit sales decline.
The company’s same-store sales in the U.S. plunged 17% in the first quarter, while its revenue sank 8.9% to $838.8 million. And although it narrowed its loss to $7.2 million, or 9 cents a share — from $21.3 million, or 25 cents, a year earlier — it still blew past Wall Street’s expectation of a 5-cent loss per share.
Abercrombie couldn’t even blame its dismal performance on the recent backlash against Chief Executive Mike Jeffries, which reared up after the quarter ended May 4.
In the last two weeks, the retailer has issued as many apologies “for any offense caused” by Jeffries’ comments in a 2006 interview about the brand’s efforts to “go after the cool kids.”
Consumers have been slamming the company — some rather creatively — since Jeffries’ statements about the “exclusionary” strategy re-emerged from hibernation and went viral, fueled by activists’ demands for the chain to offer larger clothing sizes.
One man filmed himself handing out Abercrombie clothing to homeless people on Los Angeles’ skid row. A plus-size blogger posted photos of herself posing in spoofs of Abercrombie’s sexualized ads.
This week, Abercrombie executives met with a teen activist who had garnered 68,000 signatures on a Change.org petition demanding an apology from Jeffries.
The company also is awaiting news on a possible injunction in Colorado that could force it to revamp its store exteriors to be more accessible to disabled shoppers.
On Friday, Abercrombie said same-store sales declined 13% for its eponymous brand and 18% for its Hollister label. The company, which operated 1,053 stores at the end of the quarter, said it expects to close 40 to 50 stores in the U.S. during the year as leases expire.
Abercrombie stock slumped 8%, or $4.35, on Friday to $50.02 a share.
The quarter “proved to be more difficult than expected on the top line due to more significant inventory shortage issues than anticipated, added to by external pressures,” Jeffries said in a statement.
The inventory issues have largely passed, he said.
Analyst Amy Noblin of William Blair & Co. reiterated her “outperform” rating on the company, saying in a note to investors that the stockpile situation and poor weather conditions improved throughout the quarter while rising sales of products at regular price “demonstrates solid brand equity.”
Abercrombie said it expects same-store sales to continue slipping through the rest of the year. The New Albany, Ohio, company forecasts earnings per share of 28 cents to 33 cents for the current quarter and weakened its full-year prediction to $3.15 to $3.25.
“We’re encouraged with management’s multiple programs and initiatives as they all appear appropriate to improve the company’s profitability over time,” RBC Capital Markets analyst Howard Tubin wrote in a note to clients. “However, like most turnaround stories, execution is key and executing on multiple fronts at the same time is not easy.”