Abercrombie & Fitch no longer expects results to improve this year

Clothes retailer Abercrombie & Fitch Co posted a bigger-than-expected loss for the second quarter as efforts to win back shoppers through store remodelling and other measures failed to boost sales and are not expected to do so for the rest of the year.

The retailer’s about-turn from a forecast issued in May, when it said it expected results to improve in the second half of the year, sent its shares tumbling more than 14 per cent in premarket trading on Tuesday. Abercrombie’s sales dropped for the 14th straight quarter and comparable sales fell a slightly steeper-than-expected 4 per cent, mainly due to lower traffic, including from tourists, at its flagship stores.

“Comparable sales [will] remain challenging through the second half of the year, with a disproportionate effect from flagship and tourist locations,” the company said.

Abercrombie, like other teen apparel retailers, has posted a string of sales declines as it struggled to compete with the trendier and often cheaper products at fast-fashion retailers such as H&M and Inditex's Zara. To win back shoppers, Abercrombie is investing heavily in remodelling its Hollister stores, has hired designers from top brands to keep up with trends and shifted away from the logo-centric designs that were once a big draw.

Abercrombie said its cost of sales dipped 0.6 per cent, stores and distribution expenses dropped 1.6 per cent, while marketing, general and administrative expenses fell 7.3 per cent in the quarter ended July 30th. But, that was not enough to offset a 4.2 per cent fall in net sales.

– Reuters