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Abercrombie & Fitch Faces Retail Challenges

Discounting and a tough apparel market contributed to Abercrombie & Fitch’s sales decline for the fourth quarter and fiscal 2016.

“Results for the quarter reflect a still challenging and competitive retail environment, however we continue to make progress on our strategic priorities,” Abercrombie & Fitch CEO Fran Horowitz said. International markets improved measurably from last quarter, for both Abercrombie and Hollister brands, and the direct-to-consumer business continued to deliver positive comparable sales in both the U.S. and international markets.”

For the fourth quarter ended Jan. 28, 2017, net sales were down seven percent to $1.036 billion and comparable sales decreased by five percent compared to fourth quarter 2015. Abercrombie & Fitch fourth quarter net sales decreased 13 percent to $442.4 million and the U.S. region’s fourth quarter net sales were down eight percent to $688.2 million. Despite fourth quarter net sales declines, the company achieved a 31 percent growth in direct-to-consumer sales.

Fourth quarter operating income was $61.3 million, compared to $120.1 million in the same period last year. GAAP net income per diluted share was $0.71, compared to $0.85 for fourth quarter 2015.

For fiscal 2016, net sales decreased by 5 percent to $3.327 billion and comparable sales were down 5 percent. Abercrombie & Fitch’s fiscal 2016 net sales decreased by 9 percent to $1.487 billion, meanwhile the U.S. region experienced a net sales decline of 7 percent for the year. During fiscal 2016, direct-to-consumer sales grew to an estimated 25 percent of total company net sales for the year.

Fiscal 2016 operating income was $15.2 million, compared to $72.8 million for fiscal 2015. For the full year ended Jan. 28, 2017, GAAP net income per diluted share was $0.06, compared to $0.51 for fiscal 2015. Excluding certain items, Abercrombie & Fitch reported an adjusted non-GAAPA net loss per diluted share of $0.06, compared to $1.12 last year.

Abercrombie & Fitch’s fiscal 2017 outlook projects that comparable sales will improve for the Abercrombie & Fitch brand, despite a challenging retail environment. The company will also trim its internal expenses and expects an operating income of approximately $25 million.