LONDON, UK / ACCESSWIRE / September 1, 2016 / Active Wall St. announces its post-earnings coverage on Abercrombie & Fitch Co. (NYSE: ANF). The company reported second quarter fiscal 2016 results on August 30th, 2016. The teen apparel retailer reported a bigger-than-expected loss, hurt by declining sales at its larger flagship locations. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Numbers

For the quarter ended on July 30, 2016, Abercrombie reported net loss of $13.13 million, or $(0.19) per diluted share, compared to net loss of $810 thousand, or $(0.01) per share, in the year ago period. On an adjusted basis, the company reported loss of $(0.25) per share, which was below analysts' projection of a loss of $(0.20) per share. The company generated revenue of $783.16 million in Q2 FY16, down 4.2% compared to revenue of $817.76 million in Q2 FY15. The fashion retailer posted a 14th consecutive quarterly decline in sales attributed to low traffic to its flagship and tourist stores.

"Flagship and tourist locations continued to account for the vast majority of the comparable sales decline as traffic remained a significant headwind," Arthur Martinez, executive chairman of Abercrombie, said in a press release.

During Q2 FY16, comparable sales at Abercrombie stores open at least a year fell 4% in the quarter, versus the expected 3.8% drop, The company predicted that, "Comparable sales remain challenging through the second half of the year, with a disproportionate effect from flagship and tourist locations."

Brand Results

By brand, net sales during Q2 FY16 dropped 5% to $363.1 million for Abercrombie and decreased 4% to $420.1 million for Hollister versus last year. By geography, net sales for the Q2 FY16 slumped 7% to $478.8 million in the U.S. and were approximately flat at $304.4 million in international markets compared to last year. The company's direct-to-consumer sales grew to approximately 23% of total company net sales for Q2 FY16, against approximately 21% of total company net sales in Q2 FY15.

Tourism and Identity Struggles

The disappointing results highlight the fact that Abercrombie is grappling with a tourism slowdown which has hurt a number of retailers which rely on large, flagship locations in major cities to drive sales. G-III Apparel Group Ltd, the producer of labels such as Calvin Klein, Kenneth Cole, and Tommy Hilfiger, reported in its earnings released announced on August 30, 2016, that revenue slumped 7% to $442.3 million. Apparel makers have reported declining sales primarily due to diminishing traffic, as a many customers prefer to shop online, and lack of spending by tourists who have been impacted by the rise in the U.S Dollar.

Like other apparel retailers, Abercrombie is also fighting for relevance with young customers who have an ever changing requirement. Consumers today are less interested in clothes with a company's logo on it and are instead opting for cheaper, fast fashion. The teen apparel sector has seen a number of recent bankruptcy filings including American Apparel, Aeropostale, Quiksilver, and Pacific Sunwear.

Stores Updates

Abercrombie announced that it is planning to open approximately 15 new stores in fiscal 2016, including approximately 10 in international markets, primarily China, and approximately five in the U.S. The company plans to open six new outlet stores, primarily in the U.S. In addition, the company anticipates closing up to 60 stores in the U.S. during the fiscal year through natural lease expirations.

Outlook

In its outlook, Abercrombie stated that they expect comparable sales to remain challenging through the second half of the year, with a disproportionate effect from flagship and tourist locations. The company also anticipates adverse effects from foreign currency on sales of approximately $25 million and on operating income of approximately $20 million, with the greatest impact in the third quarter of 2016.

Stock Performance

Abercrombie's shares tumbled 3.01% to close the trading session on August 31, 2016 at $17.74. A total volume of 7.22 million shares were exchanged during the day. The company's stock price is trading at a PE ratio of 21.17.

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