Abercrombie: Wage Increases to Cost $6M

Discussion in 'Wall St. News' started by S2007S, Feb 22, 2007.

  1. S2007S


    Abercrombie: Wage Increases to Cost $6M
    Thursday February 22, 10:10 am ET
    Abercrombie Predicts Earnings at or Below Wall Street Estimates, Says Wage Hikes Will Cost $6M

    NEW ALBANY, Ohio (AP) -- Abercrombie & Fitch Co. shares slid after the company said its profit for the first half of the fiscal year would match or fall below Wall Street estimates due to higher labor costs.

    The teen clothing retailer forecast profits of $1.47 to $1.52 per share for the first half of the fiscal year that started Feb. 4, a 10 percent to 13 percent increase over the first half of 2006. Analysts were looking for profits of $1.52 per share.

    Shares dropped $1.80, or 2.07 percent a share, to $80.20 in early morning trading on the New York Stock Exchange. The shares have been trading near their record high of $83.82 after falling as low as $49.98 in the past year.

    The company said after the financial markets closed Wednesday that it wants to retain talented employees while remaining competitive and expects minimum wage increases to cost it $6 million in the second half of the year.

    Both the U.S. House and Senate have passed bills that would raise the hourly minimum wage from $5.15 to $7.25 over two years. Several states, including Ohio, passed their own minimum wage increases in the November election.

    Abercrombie also said the costs of opening a store in London along with difficult comparisons to last year's tax rate would keep earnings growth in the mid-single digit range in the first quarter.

    The London store is expected to open next month, and the company said it might have to increase prices there to offset higher building and wage costs overseas but hopes for sales comparable to its flagship New York store.

    "Its location will be a draw for both local and tourist customers," Michael Jeffries, president and chief executive, said in a call with analysts.

    The company says it has high hopes for expanding its Hollister line of stores that cater to teens with surfer-inspired looks overseas, but that won't happen this year.

    Abercrombie said its fourth-quarter earnings jumped 20 percent, to $198.2 million, or $2.14 per share, powered by strong sales as the company continues to expand Hollister stores. That compared with profits of $164.6 million, or $1.80 per share, a year ago.

    Sales rose 18 percent to $1.14 billion from $960.4 million a year ago. Sales at stores open at least a year, considered a key indicator of a retailer's health, fell 3 percent after jumping 28 percent a year ago.

    Analysts surveyed by Thomson Financial expected earnings of $2.14 a share on revenue of $1.1 billion.

    Fourth-quarter profits included $3.5 million from gift cards sold but never redeemed, the company said.

    Hollister sales rose 33 percent in the fourth quarter to $476.8 million, compared with just 6 percent to $504 million at its flagship Abercrombie & Fitch stores. Abercrombie had 390 Hollister stores at the end of January, 82 more than a year ago.

    For the year, the company said sales increased 19 percent to $3.3 billion from $2.8 billion the previous year. Profits for the year rose to $422.2 million, or $4.59 per share, a 26 percent increase from $334 million or $3.66 per share. The most recent fiscal year had 53 weeks, one more week than the previous year.

    Besides the Hollister stores, the company, based in the Columbus suburb of New Albany, operates 357 Abercrombie & Fitch stores, 177 abercrombie stores for children and 14 RUEHL stories in the United States. It also has six stores in Canada.

    Abercrombie & Fitch: http://www.abercrombie.com
  2. S2007S


    get ready to see this happen across the board as minimum wage is lifted to over $7 an hour.
  3. Whoa so they won't be able to keep the double digit earnings growth going, let us shed a tear that the worker is earning more at the expense of shareholders. Woe to larry kudlow's capitalism.
  4. S2007S


    you cant let the shareholders down in this great economy. Its shareholders before workers. Do whats right for the shareholders.
  5. Maverick74


    Oh please. These are 16 year old girls that work at A&F who are only working there to get discounts on the clothing. Yeah, workers of the world unite. Thank God someone finally did something about those horrible working conditions at A&F. Upton Sinclair can rest easy now. These 16 year old girls can now prosper. Unreal.
  6. Maverick74


    Ever heard of the phrase "don't bite the hand that feeds you?"
  7. Yes but which is which?
  8. Most of them are rich stuck up brats anyways.. they are usually the outcast from their particular group. They get the job for the discounts for the other girls in their groups in hopes of winning over the crowd.

    Same reason they sleep with so many guys in college.. :) :)

    Competition between women can really have great benefits for concious males. :)
  9. These people earning this wage don't save, so whatever they make gets put right back into the economy. This is a lot better for the economy than tax cuts for the rich.
  10. $6 million extra in wages for the half year, compared with sales around $2B? This is much less than inflation.
    #10     Feb 23, 2007