Abercrombie & Fitch's fourth-quarter profit of a single charge

New Albany, Ohio - Abercrombie & Fitch Company's fiscal fourth-quarter profit fell, part of the cost of the Lhure closed shops, but adjusted results topped analyst estimates.

The clothing retailer said Tuesday its net income fell 31 percent to $47.5 million, or 53 cents per share, for the period ended Jan. 30. That compares with a profit of $68.4 million, or 78 cents per share, a year ago.

Taking out a charge related to the Ruehl store closings and other items, profit was 91 cents per share. That beat the 87 cents-per-share estimate of analysts surveyed by Thomson Reuters. These estimates typically exclude one-time items.

Abercrombie's board approved the shutdown of its 29 Ruehl stores and related direct-to-consumer operations in June. The brand's closure was completed in the fourth quarter.

Sales slipped 5 percent to $936 million from $980.8 million, short of Wall Street's $953.7 million.

Abercrombie, based in New Albany, Ohio, has struggled with falling sales for two years as consumers have cut back during the recession and headed to lower-priced competitors like American Eagle and Aeropostale to stretch their dollar further.

The company is feeling more pressure among its U.S. shoppers, as domestic sales fell 12 percent, but international sales surged 86 percent.

Abercrombie plans to expand overseas this year and concentrate on boosting profitability domestically, CEO and Chairman Mike Jeffries said in a statement.

Sales at stores open at least a year dropped 13 percent in the quarter. This figure is a key indicator of retailer performance since it measures growth at existing stores rather than newly opened ones.

Abercrombie reported declines across all brands for sales at stores open at least a year. At Hollister, the key sales figure slipped 19 percent, while abercrombie kids posted an 11 percent decline. For its namesake stores, the key sales figure fell 8 percent.

Abercrombie's full-year profit sagged to $254,000, or break-even, from $272.3 million, or $3.05 per share, in the prior year.

Annual sales slid 16 percent to $2.93 billion.

Abercrombie said it plans to open in Copenhagen, Denmark, and Fukuoka, Japan in 2010 fiscal year to another one of its namesake stores. The company also expects to open the epic Hollister stores and 30 shopping malls in New York-based international Hollister stores.

Beyonce sued Abercrombie & Fitch's name in the intense perfume

Pop diva Beyonce Knowles and youth clothing giant Abercrombie & Fitch's war on who is intense.

In a federal suit, the Ohio-based chain of popular mall stores sued Knowles, saying they already own the name of her upcoming scent.

Grammy Award-winning singer announced this week that she had been in conjunction with the perfume manufacturer Coty, was launched in 2002, when the craze for celebrity perfume, Jennifer Lopez 'light-emitting racked their brains in the sales of 100 million U.S. dollars.

Knowles’ perfume, named after her onstage alter ego, Sasha Fierce, is supposed to launch next spring. Her line of clothing, also called Sasha Fierce, just debuted in department stores.

The superstar singer described her new scent as “an alluring and sophisticated fragrance; one that’s refelective of my inner power.”

Abercrombie said the whole thing stinks.

Within hours of Tuesday’s announcement, Abercrombie filed suit in federal court in Columbus, asking a judge to stop Knowles and accusing her of trademark infringement, unfair competition and deceptive trade practices because it already sells a men’s cologne called Fierce.

The $40 cologne comes in a bottle featuring the standard Abercrombie and Fitch branding: a ripped male torso. Store employees spritz stacks of clothing with it.

The company said it has sold $190 million worth of Fierce since 2002 and Knowles’ perfume plan “poses a likelihood of confusion” for consumers and could cost them sales.

Abercrombie said its attorneys sent Knowles a cease-and-desist letter but she had not backed off.

Knowles 2008 album "I am ... Sasha fierce" platinum sales, has launched a called Dereon, including earrings, pendants spelling out the word fierce clothing line.

Abercrombie & Fitch 's style with some customers feeling gradually disappeared

Abercrombie & Fitch, a one-time retail sales and fashion stars young people have shown signs of a remedy, its grip on the question of style in youth.

The New Albany, Ohio, company, seller of $40 T-shirts and $90 jeans, was among the worst performers during the holiday season, even with uncharacteristically high levels of discounting. The retailer posted a 19% decline in December sales at stores open at least a year, with its lowest-priced brand, Hollister, down 25% in December from a year earlier.

Retail analysts said Abercrombie's troubles go beyond pricing to its once unerring sense of style, a problem that could be trickier to fix. The logo T-shirt and torn jeans ensemble that Abercrombie made the unofficial school uniform a decade ago has played out, said Kimberly Greenberger, a retail analyst with Citigroup Inc. who tours malls every two weeks to assess trends. That misstep has created an opening for lower-priced competitors such as Aeropostale Inc. and American Eagle Outfitters Inc., which reported December sales gains of 10% and 7%, respectively.

"The look is stale," Ms. Greenberger said. "They need to figure out what the next hot trend is and push that, because that's the only way out of this downward spiral."

In a sign the company is taking the challenge seriously, Chief Executive Mike Jeffries has taken charge of selecting the chain's female clothing. Chad Kessler, the executive vice-president who had held the job, left that position in January and will depart the company by July 31. A spokesman declined to make Mr. Kessler available to comment.

Abercrombie is making a renewed push on fashion this year, the spokesman said. For instance, after missing demand for teen dresses last year, its Hollister chain has more than a dozen dress styles for spring.

Of course, all teen retailers are confronting high youth unemployment and tight-fisted parents. But Abercrombie's competitors have been finding teens willing to spend for the right trends.

Aeropostale and mid-priced rival American Eagle Outfitters are exploiting Abercrombie's absence from high-demand styles. New York-based Aeropostale is adding more fashion-forward looks to its shelves in addition to its inexpensive basics. "We are no longer a fashion follower," said Tom Johnson, Aeropostale's chief operating officer, at a retail-industry conference last month.

American Eagle, of Pittsburgh, Pa., is bringing in new merchandise every four weeks, up from every six weeks. "Increased variety and choices…will be critical and crucial as part of regaining market share," Chief Executive Jim O'Donnell said at the same conference.

Both retailers are also seeing success with accessories, especially with jewelry at American Eagle, which tends to be a high-margin category—something Abercrombie only mildly promotes.

Abercrombie succeeded for years by selling at prices sometimes twice its competitors' and refusing to discount. When the recession made that approach untenable, the chain was slow to react. It has since experimented with lowering some of its prices. Abercrombie's average unit retail price was down 14% during the holiday season, according to Christine Chen, a retail analyst with brokers Needham & Co.

But even with lower prices and more promotions, including a gift card giveaway, Abercrombie posted steep sales declines during the holidays. "Product has been a big source of Abercrombie's issue," said Ms. Chen. "They need to continue to work on the fashion."

January sales numbers roll out Thursday, and retailers are expected to post sales gains. Stores typically spend January clearing out inventory to make way from spring, and shoppers were drawn to discounts unavailable during the holiday season. Analysts polled by Thomson Reuters think sales at stores open at least a year rose 2.5% for the companies that report. Aeropostale and American Eagle are expected to show increases of 6.2% and 5.7%, respectively. Abercrombie, however, is expected to post a decline of 8.3%.

If Abercrombie's styles aren't commanding much attention from U.S. consumers, the opposite is true with shoppers overseas. Late last year, the company opened Abercrombie megastores in Milan and Tokyo, both of which have performed well, as have Hollister mall-based stores in the U.K. The robust sales come in spite of retail prices that are nearly double that of the domestic merchandise.

To maintain its international reputation, Abercrombie withheld the holiday promotional activity—including discounts and gift card giveaways—from its large domestic stores in urban locations such as New York's Fifth Avenue. Those stores are popular with international tourists and are likewise packed.

Currently, international sales account for about 10% of the company's total revenues. That share could grow to more than 20% in 2010, said Paul Lejuez, an analyst with Credit Suisse. Mr. Lejuez estimates international sales will be $313 million for fiscal 2009 and projects that figure to more than double in fiscal 2010.

But the excitement about international potential has been tempered by the most recent economic downturn.

"This is the humility to a certain extent, they are," said Credit Suisse's Mr. Lejuez. "They realize that they can not just do what they always do."

My Abercrombie & Fitch problem with CAIR's approach

The San Francisco Bay Area chapter of the Council on American Islamic Relations (CAIR-SFBA) has filed an Equal Employment Opportunity Commission (EEOC) complaint against Abercrombie & Fitch on behalf of Hani Khan, who was fired for not removing her headscarf.

A similar complaint was filed against A&F by CAIR's Oklahoma chapter in 2008 on behalf of Samantha Elauf, who was not hired because of her headscarf.

Although CAIR is legally in the right, as far as I can tell, I intend to show that they are ethically in the wrong, and while they may win a victory for Hani, the inevitable result is that this action will harm our community. If Muslims in America wish to be a light of truth and virtue in this society we need to hold ourselves to a higher moral creed, not utilize an unethical system to coerce our neighbors.

I'll start by praising both of these women for sticking to their principles. I deeply respect and admire the integrity of women (and men) who adhere to their values in the face of oppositional pressure. I wish that their strength of character was the central theme of this story. I'd also like to ask them both if they hold the principle, as I do, that violence is not the way to solve our problems.

Let me explain what I'm talking about.

This complaint was filed with the EEOC because, as a federal agency, they are empowered to file a discrimination suit against A&F for wrongful termination. If Hani wins this discrimination suit the court will likely order A&F to rehire her, pay her lost wages, or in some other way retaliate against the company. Here's the question. Why would A&F comply with this order? What would happen if they refused? The unspoken fact is that if they don't, the government will make them comply, by force if necessary. The gun won't come out right away. They may levy fines, or revoke licenses, but if they refuse to pay those fines, if they continue to do business without a license, the last tool at the government's disposal is always violence. Wining a discrimination suit does not change hearts and minds. They comply because that subtle threat of violence permeates the entire transaction. So, I hope that these women ask themselves, as unjust and unethical as A&F's "look policy" seems to us, does threatening them with retaliatory violence, even through a proxy, conform with your principles? And I hope that the people at CAIR will ask themselves, is utilizing a coercive legal system to enforce your will on others the best way to, "encourage dialogue," or "build coalitions that promote justice and mutual understanding," as your mission statement says?

The fact is that using coercion against our neighbors is not only bad for our neighbors, it is bad for us. Most Muslims who are at all politically minded are familiar with the concept of "Blowback." US intervention in the a foreign country generates animosity toward America which explodes in unexpected ways. The same principle applies here on a smaller scale. Legal intervention in someone else's business model generates animosity toward Muslims which explodes in unexpected ways. Already, CAIR has announced they have received email threats from angry Americans.

Consider this. A&F has a history of legal issues surrounding their employment practices. In 2004 they were accused of discrimination against ethnic minorities for offering preferential treatment to whites, resulting in a class action law suit and a $45 million out-of-court settlement. Have they learned? In June 2009 they were accused of disability discrimination for hiding a one armed girl in the stock room and not allowing her on the sales floor, resulting in an employment tribunal and £8,013 compensation. In September 2009 they were accused of discriminating against the Muslim headscarf the first time, and now again. Why haven't they learned? Why is this "look policy" so important to them?

Is it just bigotry? Is it just a simple cost benefit analysis? I suppose there's no way to know for sure, but I'll tell you what I think. I think A&F chairman and CEO Michael Jeffries is a rich old eccentric who has spent the last 17 years using A&F to live out his own sexual fantasies, which incidentally involve white women, not brown women. He calls all his sales people "models" and has casting calls to put actual employees in their sexually explicit commercials. He says he thinks of A&F like a movie set, an emotional experience he wants to "sizzle with sex." I think Michael Jeffries understands better than anyone that a symbol of modesty doesn't belong in one of these soft-core bordellos. In his own words:

"We try to stay authentic and relevant to our target customer. I really don't care what anyone other than our target customer thinks."

A&F hasn't learned because you can never, ever create virtue with coercion. It's just not possible. And everyone, every Muslim, every American, every human needs to wake up to this fact. We have to find a mutually respectful way of resolving our disagreements.

So what can be done?

Interestingly, the ethical response to unethical business practices is already taking place, and that is market activism. In addition to the complaint CAIR put out an Action Alert requesting people contact A&F to express their concerns. News coverage is interviewing customers who express their outrage toward the company's discriminatory practices and threaten not to shop there anymore. People try to conflate these things together but the difference is that market activism is voluntary and rights respecting, while legal activism is coercive.

Consider this. A&F also has a history of market based controversy surrounding their more offensive merchandise and advertising. In 2002 A&F sold a shirt featuring a cartoon of Chinese immigrants and the slogan, "Wong Brother Laundry Service-Two Wongs Can Make it White." A boycott was organized by an Asian American student group at Stanford University and the company responded by discontinuing the shirt and apologizing. In 2003 their catalog contained nude photography, sexually explicit articles and recipes for alcoholic drinks, which were available to minors. There was an unprecedented wave of strong protest and organized boycotts over the publication, which was removed from stores and discontinued. In 2005 they sold a ladies shirt with the slogan, "Who needs brains when you have these?", and "I had a nightmare I was a brunette." The Women and Girls Foundation of Southwest Pennsylvania organized a "girlcott" and the company pulled the shirts.

Why does market activism work? He said it himself, "I really don't care what anyone other than our target customer thinks." But, also because market activism actually reflects real public opinion. If you want to influence A&F's "look policy" you need to put down the gun and pick up the megaphone.

Here's what I suggest. Imagine if Hani Khan went public and said she was withdrawing her EEOC complaint on ethical grounds and that she didn't believe violence was the way to solver her problems. Immediately the strength of her character would take center stage. Can you imagine the unprecedented publicity and public support that would be generated by such a statement? Then, imagine if she admitted what we all know, that she was not fired because of her religion. She was fired because of her principled refusal to be made a sex object. And imagine if she used the attention to call for a boycott until the exploitative "look policy" was abolished. Imagine if CAIR contacted all the Christian organizations, women's rights activists and Asian American groups that A&F has crossed in the past to actually, "build a coalition to promote justice and mutual understanding." Reports out this month say that A&F's profits were down 31% last quarter from the recession. Now is not the time they want to be dealing with bad publicity. It might be more work, but at least this way we could maintain the moral high ground.