Abercrombie shares down on lower-than-expected sales

<p>Clothing retailer’s revenue slid 5.8 per cent in Q2 2014.</p>

Clothing chain Abercrombie & Fitch fell the most in more than nine months after second-quarter sales fell below analysts’ estimates.

Revenue slid 5.8 per cent to $890.6 million (£537.2 million) in the period, while previous analysts estimated this figure would be $909.8 million on average, according to data compiled by Bloomberg.

Some analysts believe that the company is struggling to compete with fast-fashion companies such as Forever 21 and Hennes & Mauritz AB (HMB), which have won over teens with their ability to react to trends quickly. 

Slow mall traffic and an industry-wide reliance on heavy discounting to entice customers were also blamed.

“Based on what we have seen and heard from other mall-based teen retailers, customer traffic continues to negatively weigh on business,” Howard Tubin, a New York-based analyst, told Bloomberg.

Signs of recovery

Chief executive officer Mike Jeffries said in a statement today (August 28th) that the company has been working to turn around these softer sales, revamping its clothing.

He said he is now seeing small signs of recovery.

"In a continued challenging environment, our sales for the second quarter were somewhat below plan, but we have seen modest improvement since the back-to-school floorset," he said.

Earlier this year, Mike Jeffries said the company would cut costs for its clothing line, which could allow it to lower prices without significantly hurting margins. 

It has also reduced logo use in its merchandise and said it plans to close 60 of stores in the US this year as their leases expire, the Wall Street Journal reports.

Abercrombie & Fitch was down 6.02 per cent at 10:37 ET today (August 28th) in New York.

Find up to date information on the FTSE 100 and spread betting strategies at City Index.

 

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.