Teen clothier Abercrombie & Fitch said it would cut its prices in an effort to keep pace with competition and try to bounce back after a weak fourth quarter.
The retailer announced Wednesday that its net income for the fourth-quarter dropped 58 percent to $66.1 million for the thirteen weeks that ended February 1, 2014, compared to $157.2 million over the same period last year.
For 2013, the company reported a 77 percent decline in net income bringing it to $54.6 million for the fifty-two week period that ended February 1, 2014, down from $237 million for the fifty-three week period that ended February 2, 2013.
Mike Jeffries, Chief Executive Officer, said, “2013 was a challenging year, with sales and earnings falling well short of the objectives we set at the beginning of the year. After three years of positive growth in our combined U.S. chain stores plus direct-to-consumer comparable sales metric, that metric turned negative in 2013 against the backdrop of a challenging retail environment, particularly in the teen space. It is important that we return to positive growth, particularly in our core U.S. business, and the steps we are taking as we execute against our long-range strategic plan should put us in a position to achieve this goal.”
On Wednesday, the company said it would lower prices by cutting merchandise costs..
“We need to be competitive on price, particularly female fashion, and we will aggressively look to reduce average unit cost,” Jeffries said on a post-earnings conference call.
For the fourth quarter, net sales were down across the board with Abercrombie & Fitch bringing in $477.9 million, abercrombie kids with $107.9 million and Hollister Co. with $684.1 million. Comparable sales by brand, including direct-to-consumer, were down 6 percent for Abercrombie & Fitch, 8 percent for abercrombie kids, and dropped 10 percent for Hollister Co. It was the eighth straight quarter that the company saw a drop in same-store sales.
Jeffries, who was recently ousted from Abercrombie’s board, acknowledged the company has ample work to do in 2014 but noted a positive outlook for the company’s future. “We are encouraged by the progress we are making as we continue to aggressively execute against our long-range plan objectives, which we believe will generate meaningful improvements in our business, and create significant value for shareholders,” he said.