A hot retailer reporting a 4% drop in second quarter profit in the face of a 4% decline in same-store sales might not seem like good news but, in a very tough retail climate, it's a sign of how well Abercrombie and Fitch (NYSE: ANF) is holding up.The stock's up more than 2% on the company's second quarter earnings, released this morning. The highlights:
- Revenue up 5% to $845.8 million.
- Abercrombie and Fitch same-store sales up 3%. abercrombie (kids clothes) SSS down 11%; Hollister down 9%, RUEHL down 22%.
- EPS down 1% to 87 cents on improved gross margins.
Investors have to be somewhat troubled by the performance of Hollister and the much-hyped RUEHL. Hollister may have been hurt because, as a lower-price point version of Abercrombie (Abercrombie won't call it that but that's what it is), its shoppers may be more sensitive to the economy. The huge plunge in same-store sales at Ruehl indicates that that brand might not have the great future people once thought it did -- but at less than 2% of the company's total sales, it won't drag anything down.
The stock has taken a beating with the rest of the retailers but, long-term, its prospects remain as strong as ever.
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