A&F'S Three Quarter Sales Are Facing A New Recession And New Challenges.

American teenagers

The main line of retailer Abercrombie & Fitch Co.

Abercrombie & Fitch

In the last three quarters, the same store sales plunged 14%, far higher than the comprehensive expectations of research company Consensus Metrix, 6.2%, which fully showed that consumers did not accept the brand image after their reshaping.

At the same time, the Group expects that the same store sales will continue to be challenged during the current holiday season. Abercrombie & Fitch Co. fell 15.5% on the US stock market last Friday, and the market closed down to Thursday, which has fallen by 37% in 2016.

Abercrombie & Fitch Co. CEO Arthur Martinez pointed out in the earnings report that difficulties in the three quarter were expected.

A&F flagship stores and tourist attractions stores still suffer a lot of headwinds, while other stores continue to shrink.

Abercrombie and Fitch Co. CEO Mike Jeffries 2014 was launched in December. Since then, the two brands A&F and Hollister have been innovating. Now the Hollister is successful. Even in the three quarter of this year, the same store sales fell 2% in the two quarter and zero growth in the first quarter and three quarter, but at least gradually improved, and analysts' forecast for the third quarter of the same store sales fell 1.9%.

In mid October, A&F has launched a new advertising and more mature brand image, giving up more than 10 year old youngsters to the 18-25 year old workplace.

But some analysts think the strategy is wrong.

Arthur Martinez said that it will continue to develop A&F brand in all channels through product pformation, customer experience and marketing. He believes that the brand has been aggravated by the complex market environment while experiencing the pain of restructuring.

Abercrombie & Fitch Hongkong flagship store opened up in 2012 with the help of a muscle strong man attack.

In the three quarter, Abercrombie & Fitch Co.'s overall same store sales fell 6% by Hollister, but still fell short of the 4.4% decline expected by the market. Also, the accelerated decline of A&F was slower than that in the first quarter and two quarter 4%.

By region, the same market sales in the US market decreased by 5% and the international market by 10%.

To stop the loss, the group has decided to close the A&F flagship store in Seoul, South Korea in January 2017, and the Hongkong flagship store, which is booming in 2012, will lift the lease ahead of schedule, which is expected to generate a one-time expenditure of $16 million in the fourth quarter.

It is reported that in 2011, Abercrombie & Fitch Co. was leased to HK $7 million a month, and the rental and lease of the flagship store in central were doubled to that of the former tenant Shanghai brand until November 2020.

However, with the decline of the brand and the deterioration of the retail market in Hongkong due to domestic and local factors, the shops and sales are far less natural than before.

Last year, the Coach Inc. (NYSE:COH) Cox Queen's flagship store, which was a few steps away from the A&F central flagship store, had also been closed early, with a monthly rent of HK $7 million 200 thousand.

As for the local market, Abercrombie & Fitch Co. plans to open 2 new stores in the fourth quarter, and will close 35 stores with the end of the lease, increasing the number of stores to 50.

In the past 6 years, the group has closed 1/3 stores in the local market. As of October 29th, the total number of stores in the United States was 745, with 185 stores in the international market and 930 stores altogether.

Fourth quarter, the group will add 5 new outlets in China.

A&F the unsalable sales of the season will exert great pressure on profit margins.

Arthur Martinez revealed that due to overheated purchases, the weather was exceptionally warm. During the three quarter, the group had to plan extra sales to clean up the stock, resulting in a gross margin of 150 basis points to 62.2% over the same period last year, but the stock as at October 29th was significantly reduced by 14.2% to 516 million 100 thousand dollars compared with the same period last year.

Net profit plummeted from 80.4% to 8 million 274 thousand dollars, compared to 42 million 285 thousand US dollars in the same period last year, and EPS decreased from 0.60 to 0.12 US dollars, adjusted by EPS to 0.02 US dollars, far less than FactSet's comprehensive forecast of $0.20.

Net sales totaled 821 million 700 thousand US dollars, down 6.5% from 878 million 500 thousand US dollars in the same period last year, or less than the US $831 million forecast for the 15 consecutive quarters.