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Abercrombie’s Q2 direct-to-consumer sales grow while overall sales slide

August 30, 2016 12:07 PM
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Amid a lackluster second quarter, young adult apparel manufacturer and retailer Abercrombie & Fitch Co. executive chairman Arthur Martinez eyed one promising trend: The retailer’s direct-to-consumer sales, which include web transactions and sales placed online within a store, are growing.

The multichannel retailer, No. 58 in the Internet Retailer 2016 Top 500 Guide, today reported that while overall sales fell 4.2% in the fiscal second quarter its direct-to-consumer sales, which include online and sales placed online within a store, rose 4.9%.

“Flagship and tourist locations which are concentrated in the Abercrombie brand business continued to account for the vast majority of the negative comp sales performance as traffic continues to be a significant headwind," he said during a conference call with analysts. "We were encouraged, however, by strong growth of the direct to consumer business both domestically and internationally and by our comp sales rebound in the Hollister European business including the U.K.”

The retailer is investing in efforts to bolster its mobile and omnichannel capabilities, said Fran Horowitz, Abercrombie’s president and chief merchandising officer. "We saw strong growth in direct to consumer both domestically and internationally including a nearly 60% increase for the last year in sales generated from an order spike in mobile devices." Moreover, buy online, in-store pickup now accounts for 7% of online orders, she said. The retailer, which already offers the option in the U.S. and U.K., plans to roll it out in Canada in the third quarter.  

To help bolster the retailer’s European business, Abercrombie last week entered into a wholesale agreement with Zalando SE in which the German-based online retailer will sell Abercrombie clothes on its websites. Zalando is No. 7 in the 2016 Europe 500.

"As Europe's leading online platform for fashion, we are confident Zalando will enhance the value of all of our brands and this business will accompany our strong store and digital presence already established in the region," Horowitz said.

For the fiscal second quarter ended July 30, Abercrombie reported:

  • Total revenue of $783.2 million down 4.2% from $817.8 million from fiscal Q2 2015.
  • Direct-to-consumer and omnichannel sales accounted for 23% of net sales, up from 21% a year earlier. That translates to an estimated $180.1 million in direct-to-consumer sales, up 4.9% from an estimated $171.7 million.
  • Comparable-store sales, which include U.S. and international, declined 4%. U.S. comparable-store sales also decreased 4%. Comparable-store sales do not include e-commerce.
  • Net loss was $12.0 million compared to a $612,000 gain.

For the fiscal first half of the year, Abercrombie reported:

  • Total revenue of $1.469 billion down 3.8% from $1.527 billion for the fiscal first half of 2015. Direct-to-consumer and omnichannel sales of an estimated $344.6 million in direct-to-consumer sales, up 2.9% from an estimated $334.9 million.
  • Net loss was $50.7 million compared to a $64.1 million loss.
 

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