NEW YORK (AP) -- Abercrombie & Fitch Co. reports its second-quarter financial results Wednesday, which are expected to offer insight into how the teen merchant will turn around its weak business.
WHAT TO WATCH FOR: Investors will want to know how early sales of back-to-school merchandise have fared and any commentary on how much discounting is needed to bring back shoppers. They'll also be looking for any comments regarding the broader economy.
The purveyor of preppy jeans and T-shirts, which was forced to cut prices during the recession, is facing a new round of challenges as it copes with a financial debt crisis in Europe and a stubbornly challenging environment back home. The company made a big investment in Europe before the financial crisis. For the year ended Jan. 28, Europe accounted for about 20 percent of Abercrombie's total sales, according to the annual report.
Earlier this month, Abercrombie & Fitch issued an earnings forecast for the second quarter that was far below what Wall Street had expected. It also said that sales at stores opened at least a year were down 10 percent for that period. Revenue at stores opened at least a year is considered a key measure of a retailer's health as it strips away the impact of recently opened or closed stores. The metric fell 5 percent in the U.S. and 26 percent internationally.
Abercrombie & Fitch said at the time that it plans to offer investors a strategic update when it reports second-quarter financial results. That includes reducing the number of Hollister stores it plans to open, a pause in its flagship store commitments, an update on its stock repurchase plans and other changes.
Abercrombie & Fitch announced in June that it was closing 180 U.S. stores over the next few years. The chain had already closed 135 underperforming U.S. stores in two years. The closure will primarily be among its namesake and kids brands but it also plans to close a few Hollister stores as well.
The closures follow a poor first-quarter report, issued in May, that showed an 88 percent drop in first-quarter net income due to higher costs and declining sales in established stores and in Europe. Total sales rose 10 percent but fell short of expectations.
WHY IT MATTERS: Abercrombie & Fitch is a major teen retailer so any insight into spending is valuable. About 70 percent of economic growth is the U.S. is powered by consumer spending.
WHAT'S EXPECTED: Analysts surveyed by FactSet expect earnings of 17 cents per share on revenue of $955.6 million.
LAST YEAR'S QUARTER: The New Albany, Ohio, retailer posted earnings of 35 cents per share on revenue of $916.9 million.