More on Abercrombie & Fitch's (ANF) FQ3 report: The EPS shortfall was largely due to...

More on Abercrombie & Fitch's (ANF) FQ3 report: The EPS shortfall was largely due to higher-than-expected clothing costs, which led to Abercrombie's gross margin falling 350 bps Q/Q, to 60.1%. Same-store sales were up 7% Y/Y, compared with 9% in Q2. A&F same-store sales rose 4%; Abercrombie Kids rose 6%; and Hollister Co. rose 8%. ANF -11% premarket. (PR)

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Comments (3)
  • Clumsy Rick, CFA
    , contributor
    Comments (70) | Send Message
    EPS shortfall was NOT due to higher-than-expected clothing costs. Costs were known for months, with only a little variability due to mix. The miss was due to higher discounts and promotions that were necessary to drive the business due to slowing sales internationally. Also, expenses were higher than expected, with no real explanation given yet.
    16 Nov 2011, 08:04 AM Reply Like
  • SA Editor Eric Jhonsa
    , contributor
    Comments (1167) | Send Message
    From the PR:


    "The decrease in the gross profit rate was driven primarily by an increase in average unit cost combined with an approximately flat AUR."


    Also, an AP column notes the role played by high commodity costs:
    16 Nov 2011, 08:24 AM Reply Like
  • Clumsy Rick, CFA
    , contributor
    Comments (70) | Send Message
    The PR quote cited does not say the EPS short fall was from higher costs. It says gross margins were down because of higher costs and flat AURs. Big difference. In fact, the PR does not talk about a short fall in EPS relative to consensus at all.


    Average unit costs were up considerably, but this was not a surprise. It was as the company forecasted and as analysts expected, which was confirmed on the conference call. The flat AURs part of the equation is where the company fell short of expectations and this was due to the higher discounts and promotions necessary to drive sales (as well as mix), as I stated above. Not that it matters at this point, since anyone listening to the conference call or having read an analyst note since then knows this.
    17 Nov 2011, 06:02 PM Reply Like
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