August 30, 2018 / 11:48 AM / a month ago

Abercrombie sales miss as Hollister runs out of stock in Europe

(Reuters) - Abercrombie & Fitch Co (ANF.N) failed to take full advantage of an unusually long summer in Europe as its stock of Hollister brand of summerwear could not keep up with increased demand in the second quarter, sending its shares down as much as 14.6 percent.

The company’s quarterly same-store sales missed Wall Street estimates on Thursday, taking the shine off a surprise adjusted profit.

“We sold through our warm wear seasonal categories too quickly and frankly ran out of ammunition as we moved through the quarter and the weather turned much warmer for much longer,” Chief Operating Officer Joanne Crevoiserat said on a conference call. “We overreacted to slower selling coming out of the first quarter.”

Same-store sales of Hollister, the company’s key revenue contributor, rose 4 percent in the second quarter, but missed the analyst average estimate of 5.3 percent rise.

In the current quarter, the company has made adjustments to its inventory to better suit the seasonal consumer tastes in Europe, Chief Executive Fran Horowitz said.

The company said sales at established stores rose 3 percent in the quarter. Analysts on average had expected 3.7 percent increase, according to Thomson Reuters I/B/E/S.

FILE PHOTO: Signage is seen at the Abercrombie & Fitch store on Fifth Avenue in Manhattan, New York City, U.S., February 27, 2017. REUTERS/Andrew Kelly/File Photo

Given the strong sales coming out of peers such as American Eagle Outfitters (AEO.N) and Urban Outfitters (URBN.O), Abercrombie’s comparable sales will likely not be enough for investors, RBC Capital Markets analyst Brian Tunick said.

Its flagship Abercrombie brand also missed analysts’ estimates for the quarter, raising concerns the segment’s recovery is stills on shaky ground.

Abercrombie, which helped define teenage fashion before the turn of the millennium with its risque advertising and logo emblazoned apparel, fell out of trend in the late 2000s as other fast fashion companies gained popularity.

The company has since tried to re-brand its namesake fashion brand by doing away with showcasing topless male models in stores and instead making advertisements that cater to a more diverse audience.

Net loss attributable to Abercrombie narrowed to $3.9 million, or 6 cents per share, in the second quarter ended Aug. 4.

Excluding one-time items, the company earned 6 cents per share, while analysts had expected a loss of 4 cents.

The company’s net sales rose 8.1 percent to $842.4 million. Analysts on average had expected revenue of $845.2 million.

Reporting by Uday Sampath in Bengaluru; Editing by Arun Koyyur

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