Abercrombie books loss, plans review of Ruehl unit

The company, which has resisted cutting prices as drastically as other teen retailers, reduced prices during the quarter and said it is “actively planning for meaningful reductions” — especially in its Hollister and children's stores.

“The consumer is reluctant to spend on premium brands,” said Chairman and Chief Executive Mike Jeffries during a conference call with investors. “There is a price consciousness dictating shoppers' purchases today, unlike anything I have seen before.”

Sales also suffered, he said, because the company failed to anticipate some key women's fashion trends.

“Clearly we missed dresses and clearly we weren't as aggressive with print and pattern as we should have been,” Jeffries said. “We were wrong. I was wrong, and we're correcting as we go forward.”

Dresses will be delivered to the company's stores “aggressively” during the current quarter, he said.

Abercrombie said it expects to take a charge related to the Ruehl business of up to about US$55 million before taxes, which will be added to the first-quarter report it files with the Securities and Exchange Commission.

Excluding that still-to-be-determined charge, the New Albany, Ohio-based company posted a loss of US$26.8 million, or 31 cents per share, for the period that ended May 2. In contrast, Abercrombie reported a profit of US$62.1 million, or 69 cents per share, last year.

Chief Financial Officer Jonathan Ramsden said the price reductions pressured Abercrombie's margins.

“We continue to test and evaluate our approach to markdowns, but anticipate continued pressure on the gross margin rate for 2009 as a result of markdowns,” he added.

Analysts polled by Thomson Reuters had forecast a loss of 14 cents per share. The company blamed higher occupancy expenses, which were mostly related to new store openings last year, for its wide miss of Wall Street's consensus earnings forecast.

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