Abercrombie Tried A Turnround, But Sales Are Still Tanking

"We are clearly disappointed with our results for the third quarter," Abercrombie & Fitch's CEO Mike Jeffries said. Sales at the fashion chain dropped by 7% in the U.S., and 15% internationally.

Despite starting to reorient the company with new board members, adjusting how it describes itself, and abandoning its logo in the U.S., Abercrombie's sales keep on falling.

The company said Friday that its sales for the third quarter — the three months ending November 1 — were "below expectations", and sales in September and October "significantly weaker" than sales in August. Its total sales were $911 million for those three months, compared to $1 billion in the quarter last year. The drop in sales was particularly bad overseas, with comparable sales dropping 15%. Sales were down 7% in the U.S..

Even worse, the sales drop is coming alongside lower profit margins for the retailer. Abercrombie said that it was expecting "modest gross margin rate erosion for the quarter compared to last year" — basically, lower profits for each item sold — thanks to the "highly promotional and challenging environment."

The company's stock has plummeted in response to the news, down 14% today to $30.43, a two-year low.

The company's Hollister brand continues to struggle even worse than its flagship stores. The company appointed a new president last month former Ann Taylor Loft president Fran Horowitz. She previously headed women's merchandizing and design at Express. A year ago, Abercrombie said that it would revamp its Hollister stores, including glass fronts that would replace the surf-inspired porches.

The company said that Hollister "continued to underperform relative to A&F," especially in Europe. "Weakness in tops, particularly fleece and male graphic tees, more than offset positive trends in jeans and dresses," the company said.

While the company's profit numbers are not official, the 40 to 42 cents a share range it reported is well below the 52 cents a share it earned last year in the third quarter and below the 68 cents analysts polled by Bloomberg expected. The company will report its full third quarter earnings on Dec 3.