NEW ALBANY, Ohio – Abercrombie & Fitch Co. (ANF) reported a 20 percent drop in third-quarter earnings Tuesday, citing a nearly $33 million one-time charge to settle three class-action lawsuits related to work force diversity. The clothing retailer was also cautious about the current quarter, saying it expects earnings to be flat.
For the three months ending Oct. 30, the suburban Columbus retailer earned $40.1 million, or 42 cents per share, down 21 percent from the $50.5 million, or 51 cents per share, earned at the same times a year ago.
Hispanic and Asian plaintiffs sued Abercrombie in June 2003 in San Francisco, alleging the retailer hires a disproportionately white sales force, puts minorities in less-visible jobs and cultivates a virtually all-white image in its catalogs and elsewhere.
On Tuesday, the company said it would pay $50 million to settle the litigation, taking a charge of $32.9 million, or 22 cents per share, in the third quarter.
Excluding the lawsuit costs and a 1 cent gain resulting form a stock buyback, Abercrombie earned 63 cents a share.
Analysts surveyed by Thomson First Call expected earnings of 60 cents a share.
For the fourth quarter, the company said it was assuming sales growth at stores open at least a year would be 12 percent — about the same figure as last year. It also expects net income to be similar to a year ago.
Abercrombie shares were down 77 cents, or 1.8 percent, at $41.39 on the New York Stock Exchange (search). The stock has traded between $23.07 and $43.03 during the past 52 weeks.
Quarterly sales were $520.7 million, up 17 percent from $445 million a year ago.
Abercrombie said it had a 19 percent increase in its men's business and a 23 percent increase in its Hollister Co. (search) brand geared toward those in high school.
The company operates 363 Abercrombie & Fitch stores, 174 abercrombie stores for children and 224 Hollister stores.
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