Abercrombie , down 8 percent, beat estimates and posted a decent 5 percent increase in same store sales, but inventory levels, up 47 percent, were a shocker and the company spent a good part of its conference call defending the rise in inventory levels.
The worry is that it is looking like back-to-school will be VERY promotional (sales are soft, it's really hot, Labor Day comes late)...if that is the case, ANF will have to unload higher inventory at lower prices, pressuring margins.
Company officials said, "We believe this is necessary to correct for the fact that we were significantly underinventoried and below presentation standards coming into the Fall season last year," and after several inquires along the same lines, said, "[W]e have the inventory we think we need to drive the business."
Topline growth is not materializing in most retailers. Wal-Mart , with U.S. comp store sales down 1.8 percent, was also a disappointment, considering they aggressively lowered prices during this period.
That's not all: TJX sees flat to negative 1 percent decline in same store sales in the second half, and Home Depot lowered its FY sales growth forecast to 2.6 percent, down from its prior 3.5 percent outlook.
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