Q1 same-store sales disappoint
Abercrombie & Fitch (ANF) stock was down 24.5% as of 10:38 AM EST today, as the company generated weak SSSG (or same-store sales growth) for the first quarter of fiscal 2019.
Abercrombie & Fitch’s first-quarter SSSG of 1.0% lagged analysts’ estimate of 1.3%. The company’s Hollister brand delivered SSSG of 2.0%, while the SSSG of the Abercrombie brand was 1.0%. Hollister brand’s SSSG slowed down compared to the 6% SSSG in fiscal 2018’s fourth quarter and first quarter as well. The slowdown in the Hollister brand is a matter of concern given that it’s a key growth driver for the company and connects well with teens. The company’s first-quarter sales grew 0.4% on a year-over-year basis to $733.97 million against analysts’ estimate of $733.36 million.
Abercrombie & Fitch posted a lower-than-expected adjusted loss per share of $0.29 compared to analysts’ estimate of a loss per share of $0.43. The company’s fiscal 2019’s first-quarter adjusted loss per share narrowed compared to an adjusted loss per share of $0.56 in fiscal 2018’s first quarter due to lower stores and distribution expenses as well as marketing, general, and administrative expenses.
Lower-than-expected Q2 outlook
Abercrombie & Fitch also disappointed investors with a lower-than-expected sales outlook for fiscal 2019’s second quarter. The company expects its second-quarter sales growth in the range of 0% to 2%, reflecting the negative impact of about $10 million from currency fluctuations. Analysts were expecting second-quarter net sales to grow by 2.8%. The company expects its second quarter same-store sales to be almost unchanged on a year-over-year basis.
The fiscal 2019 outlook was kept unchanged, and the company continues to expect net sales growth in the range of 2% to 4%, driven by same-store sales growth in low single digits and contribution from new stores.
As part of its store optimization plan, the company announced the closure of three flagship stores in fiscal 2019, including the closure of SoHo Hollister flagship store in New York City in the second quarter.