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Abercrombie reports big drop in 4Q profit

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The Associated Press 11:46 AM Wednesday, February 15, 2012

NEW ALBANY, Ohio — Abercrombie & Fitch Co.'s fourth-quarter earnings plummeted as the teen clothing chain wrestled with higher production costs and was forced to slash prices to bring in holiday shoppers.

However, investors pushed up shares almost 9 percent in early morning trading amid a solid earnings outlook for the current year.

Abercrombie & Fitch, based in New Albany, Ohio, said Wednesday that it earned $19.6 million, or 22 cents per share, in the three months ended Jan. 28. That compares with $92.6 million, or $1.03 per share, in the same period last year.

Excluding certain items related to store closings, lease exits and other issues, the retailer posted earnings per share of $1.12.

Total revenue fell almost 11 percent to $1.33 billion, down from $1.49 billion in the year-ago period.

Analysts were expecting $1.13 per share on revenue of $1.33 billion.

"Our results for the fourth quarter were below our expectations in an extremely challenging environment," Chairman and CEO Mike Jeffries said in a statement. However, he noted that he remains confident that the company is on track in building a global brand.

Revenue at stores open at least a year was unchanged for the entire chain compared with a year ago. The metric is a key measure of a retailer's health. The figure slipped 4 percent at Abercrombie & Fitch, declined 3 percent at Abercrombie's Kids division and increased 2 percent at Hollister Co.

The company's gross profit rate for the fourth quarter was 56.1 percent, down from 63.6 percent in the same period last year. The company said the decline was driven primarily by an increase in production costs along with higher-than-expected markdowns to drive shoppers into the stores.

For the current year, the company projects earnings per share between $3.50 and $3.75. Analysts expect $3.55 per share, according to FactSet.

Abercrombie says it expects to open five Abercrombie & Fitch flagship locations in Hamburg and Munich, Germany; Hong Kong; Dublin; and Amsterdam as well as an Abercrombie Kids flagship in London. The Munich and Amsterdam locations will include Abercrombie Kids stores.

The company expects to open nearly 40 international Hollister stores throughout the year.

Shares of Abercrombie rose $3.91 to $48.50.

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February 15, 2012 04:43 PM EST

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