A&F, Sales Weak, to Close Gilly Hicks Stores

NEW ALBANY, United States — Abercrombie & Fitch says young shoppers are not spending money like before and reported weak quarterly sales, issued a disappointing full-year forecast and announced plans to close all of its stand-alone Gilly Hicks stores.

Shares of the Ohio-based company plunged in after-hours trading Tuesday following the announcement.

Abercrombie & Fitch Co. CEO and Chairman Mike Jeffries said spending among younger people remains weak. Until the company sees a clear improvement, he said it will remain cautious.

As part of that strategy, the company plans to close all of its stand-alone Gilly Hicks stores. The company operated 28 of the intimate apparel stores in the U.S. and abroad at the end of its second quarter.

Abercrombie said the majority of the closures being complete by the end of its first quarter. It will continue to sell its Gilly Hicks products through its Hollister stores and website. The company expects to take a pretax charge of $90 million to $100 million related to the closings.

Abercrombie & Fitch also said Tuesday that revenue for its quarter that ended Nov. 2 fell 12 percent year-over-year to $1.03 billion. Analysts polled by FactSet were anticipating $1.07 billion for the period.

The company expects its adjusted earnings for the third quarter will come in at the higher-end of its prior guidance of 40 to 45 cents per share for the period; analysts had forecast earnings of 40 cents per share.

Abercrombie's sales from stores open at least a year fell 14 percent for the third quarter. This is considered a key indicator of operating performance because it strips away recently opened or closed stores. Abercrombie includes Web and catalog sales in this measure, which increased 11 percent for the quarter.

The company said it expects this measure will fall by double-digit percentage levels for the fourth quarter on weak sales; it also expects weaker margins as it clears out excess inventory.

Abercrombie said that based on its weak sales and margin expectations for the fourth quarter, it expects to earn $1.40 to $1.50 per share for the year on an adjusted basis; analysts were anticipating $1.96 per share.

Its stock fell $2.56, nearly 7 percent, to $35.75 in after-hours trading.

Abercrombie is holding an analyst meeting Wednesday to discuss its long-term strategic review. It is scheduled to release its full quarterly results on Nov. 21.