Abercrombie and Fitch shares fall 9% following disappointing guidance Abercrombie & Fitch (ANF $34.90 -3.41) issues guidance the third quarter, sees EPS at higher end of $0.40-0.45, excluding non-recurring items which is line with expectations with revenues of $1.033 billion which is below expectations. Total comparable sales for the quarter, including direct-to-consumer sales, decreased 14% with comparable U.S. sales decreasing 14% and comparable international sales decreasing 15%. Total direct-to-consumer comparable sales increased 11% for the quarter. Third quarter comparable sales are compared to the thirteen-week period ended November 3, 2012. The company issued downside guidance for the fiscal year 2014 with EPS of $1.40-1.50 which is below expectations. Based on a projected low double digit decrease in comparable sales for the fourth quarter, the Company expects full year adjusted non-GAAP earnings per diluted share to be in the range of $1.40 to $1.50.
This projection also assumes significant gross margin rate erosion in the fourth quarter as the Company clears through excess inventory. The company also announced that it plans to close all of its stand-alone Gilly Hicks stores. The co expects to substantially complete the closures by the end of the first quarter of Fiscal 2014. Store closures in Europe are subject to applicable notice and consultation provisions. The Company will continue to offer Gilly Hicks branded intimate apparel through its Hollister stores and direct-to-consumer business. In conjunction with the decision to close Gilly Hicks stores, the Company amended its existing Credit and Term Loan Agreements effective November 4, 2013.
The amendments allow the Company to exclude from its calculation of the minimum coverage and maximum leverage ratios up to $60 million of cash charges associated with the Gilly Hicks restructuring. In addition, the required minimum coverage ratio will be temporarily reduced through the second quarter of the 2015 Fiscal year. "Our results for the third quarter reflect continued top-line challenges, with overall spending among younger consumers remaining weak. Until we have seen a clear trend improvement, we are continuing to take a cautious approach into the fourth quarter and are working to end the year with appropriate levels of fall carryover inventory. During the quarter, we completed our long-term strategic review, and believe that we now have a clear roadmap for sustainable growth in sales, profitability and return on invested capital. We look forward to sharing the results of our review in our analyst meeting." The Company will host an analyst meeting to discuss the results of its long-term strategic review on Wednesday, November 6, 2013.