Abercrombie & Fitch Co. (ANF), a leading international specialty retailer, reported relatively weak fourth quarter 2009 results with net income of $47.5 million or 53 cents per share, compared to a net income of $68.4 million or 78 cents per share in the year-earlier quarter.
The year-over-year decline in results was primarily due to the prolonged economic downturn that resulted in reduced consumer discretionary income and cuts in non-essential spending. The quarterly results also included loss from discontinued operations and non-cash impairment charges.
Excluding one-time items, net income for the quarter was 91 cents per share compared to $1.06 in the year-earlier quarter. For fiscal 2009, Abercrombie reported break-even earnings versus $3.05 per share in fiscal 2008. Excluding non-recurring items, earnings for fiscal 2009 were $1.12 per share compared to $3.51 in the year-ago period.
Overall net sales of the company during the quarter decreased 5% to $936.0 million from $980.8 million in the year-ago quarter. Total company direct-to-consumer net merchandise sales remained flat year-over-year at $93.1 million, while overall comparable-store sales decreased 13%.
For fiscal 2009, Abercrombie reported a net sales decrease of 16% to $2.93 billion from $3.48 billion in the previous fiscal year. Total direct-to-consumer net merchandise sales decreased 6% to $249.4 million, while total comparable-store sales decreased 23% year-over-year.
Gross profit rate during the quarter decreased 110 basis points year-over-year due to a lower average retail unit. Stores and distribution expense (as a percentage of sales) increased to 44.2% during the quarter from 39.3% in the prior-year period due to higher store occupancy costs. For fiscal 2009, gross profit was 64.3% versus 66.9% in the previous year, while stores and distribution expense increased to 48.7% from 41.2% in fiscal 2008.
Marketing, general and administrative expenses decreased during the quarter from $97.5 million to $92.4 million due to savings related to employee compensation and benefits, and cut in travel and outside services. For fiscal 2009, marketing, general and administrative expense was $353.3 million, compared to $405.2 million in the previous year.
However, the rate of sales decline of the company was much higher than the reduction in expenses. Furthermore, Abercrombie witnessed an increase in rents, depreciation and lease termination costs related to the exit of RUEHL branded stores.
During second quarter 2009, management had approved the closure of 29 RUEHL stores and associated direct-to-consumer operations. Abercrombie completed the closure of its RUEHL business during fourth quarter 2009. The company incurred $56.1 million of pre-tax charges during fiscal 2009 to exit RUEHL, out of which $22.4 million was incurred in the fourth quarter.
At year-end 2009, Abercrombie had $680.1 million of cash and cash equivalents. During the quarter, the company opened a flagship store in Tokyo and five Hollister mall-based stores in Europe. For full fiscal 2009, Abercrombie opened 24 new stores (11 in the domestic market and 13 internationally) and closed 53 stores, including 29 RUEHL stores.
During fiscal 2010, Abercrombie expects to open flagship stores in Copenhagen, Denmark and Fukuoka, Japan, and a Hollister Epic store on Fifth Avenue in New York. In addition, the company also expects to open approximately 30 international mall-based Hollister stores.
In concurrence with the current new store plans and other planned expenditures, Abercrombie expects total capital expenditures in fiscal 2010 in the range of $250 million to $260 million.
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