The Wall Street Journal says an offer from the private equity firm and the rival retailer is just one of others on the table, though the Cerberus American Eagle deal might be the most appealing. Sources close to the matter expect a deal within the next month, if one emerges.
Abercrombie saw sales drop 5 percent in 2016 to $3.3 billion, marking the fourth straight year of declines, and same stores down by 5 percent. On the other hand, American Eagle saw net revenue increase by 2 percent to $3.61 billion and comp sales up 3 percent for the year.
Amid these developments, American Eagle reported results for the first quarter, ended April 29, which shows continued strength with its California-inspired Hollister brand and continued challenges to its namesake stores.
Overall, the retailer said the results were in line with its plan. The retailer experienced a net loss per diluted share of 91 cents for quarter, compared to a net loss of 59 cents per diluted share in the same period last year.
The net loss for the quarter was $69.9 million, which included approximately a $5.3 million loss due to foreign currency exchange rates. Last year, the loss was $54.9 million for the first quarter.
Net sales dropped 4 percent compared to Q1 2016, to $661.1 million. Hollister’s net sales were up 3 percent $347.7 million and Abercrombie was down 11 percent to $286.4 million
Comparable store sales fell by 3 percent for the company. Within that, Hollister was up 3 percent driven by the customer insights the company has gained from in-store interactions as well as its loyalty programs. On the other hand, Abercrombie same stores fell by 10 percent.
EVP and CFO Joanne Crevoiserat said in the company’s earnings call that the improvements at Abercrombie were taking longer than expected but it remained optimistic that the attempts to balance assortments, boost messaging through marketing efforts and improve store experience would pay off as it implements some of its successes in Hollister to the brand.
“While we anticipate the second quarter environment to remain promotional, we expect results to improve further in the second half of the year, as we see returns from our strategic investments in marketing and omnichannel,” said Fran Horowitz, chief executive officer. “The international roll-out of full omnichannel capabilities, coupled with insights from multiple customer touchpoints online and in-store, including our rapidly growing loyalty programs, means we are better equipped to anticipate our customers’ needs whenever, wherever and however they choose to engage with our brands.”
For the balance of 2017, the company’s outlook is for challenging comps sales in Q2 with better performance in the second half of the year as investments in marketing, omnichannel, training, stores take hold. It also predicts the gross margin rate will be down compared to last year’s 61 percent, though the expectation is that with a more balanced assortment and stronger engagement, the reliance on discounting will be less. The company has plans to close 60 stores and open seven new full-price stories and two outlets in the U.S.