Online and overall sales fell for Abercrombie & Fitch Inc. during the third quarter, but results were better than the retail chain anticipated, and that could be a good sign for the struggling apparel retailer.
Abercrombie, No. 55 in the Internet Retailer 2015 Top 500 Guide, reported that direct-to-consumer sales, including online and omnichannel sales, accounted for approximately 21% of its overall sales during the quarter. Based on Internet Retailer’s calculations, that means the company sold roughly $185 million online during the three months ended Oct. 31, up 1.6% from $182 million during the same time last year.
Abercrombie has been trying to revamp its brand by shifting toward trendier styles and away from selling logo and brand-emblazoned merchandise. The purpose of the strategy change is to lessen the retailer’s reliance on promotions and find other ways to cut costs. The retailer today reported a gain of $42.3 million, or 132.4%, compared with a year ago, which suggests its efforts may be starting to work.
“Our third quarter sales and adjusted operating income exceeded expectations coming into the quarter,” said Arthur Martinez, executive chairman, during a conference call with analysts. “The number of key metrics turned positive during the quarter, including comparable sales for our Hollister brand and across both our international businesses. This provides the strongest validation yet that our initiatives are taking hold and we are on the right course.”
Even so, there’s more work to do as its direct-to-consumer sales, which encompass online purchases and those that include an online component, such as online orders placed in a store, decreased slightly—by $3 million—from a year ago.
The retailer pointed to several positive signs related to its digital operations as proof that its e-commerce and omnichannel investments are starting to pay off. For instance, mobile accounts for roughly 60% of the retailer’s online traffic and is posting double-digit increases in conversions year-over-year, said Jonathan Ramsden, chief operating officer. “We now have close to 3 million cumulative downloads of our mobile apps and there are ongoing efforts to support the shift to mobile. We recently released upgraded iOS and Android apps, which are getting strong user ratings. In addition, our omnichannel investments are delivering strong returns, with order-in-store contributing significantly throughout our e-commerce growth.”
And, in China, Abercrombie generated nearly $2 million in sales on Singles’ Day. “A year into our localization efforts there, we are pleased with the return on our investments driven by both increased traffic and conversion,” Ramsden said. “Looking forward, we will add mobile enhancements in China in 2016 reflecting the already strong mobile penetration in the market.”
For the fiscal third quarter ended Oct. 31, Abercrombie reported:
- Total revenue declined 3.6% to $878.6 million from $911.5 million. Excluding the direct-to-consumer sales, total revenue declined 4.1%.
- Comparable-store sales, which include U.S. and international, declined 1%. U.S. comparable-store sales decreased 3%.
- Net income was $42.3 million compared with an $18.2 million loss a year ago.
- The web accounted for 21.0% of total sales compared with 20.6%.
For the first nine months of the year, Abercrombie reported:
- Direct-to-consumer sales of an estimated $528.4 million, down slightly from an estimated $529.4 million a year ago.
- Total revenue declined 8.3% to $2.406 billion from $2.624 million.
- Net loss was $20.3 million compared with a $7.4 million gain a year ago.