Abercrombie & Fitch Co. plans to turn out the lights on its struggling five-year-old Ruehl clothing chain.
The New Albany-based apparel merchant said Wednesday it will shut Ruehl’s 29 stores and direct-to-consumer operations and will be “substantially complete” with the effort by the end of next January. The decision comes a month after Abercrombie (NYSE:ANF) took a deep strategic look at the chain, which targets young adults with clothes and accessories.
Ruehl, whose only Ohio store is at Easton Town Center, generated a pretax operating loss of $58 million last year. The chain regularly was Abercrombie’s weakest sales performer at stores open at least a year. Ruehl’s same-store sales were off 33 percent in May.
Abercrombie earned $272.3 million on $3.54 billion in revenue last year.
“It has been a difficult decision to close Ruehl, a brand we continue to believe could have been successful in different circumstances,” CEO Michael Jeffries said in a statement. “However, given the current economic environment, we believe it is in the best interests of the company to focus its efforts and resources on the growth opportunities afforded by our other brands, particularly internationally.”
The company didn’t disclose the effects on the chain’s work force, nor did it indicate the number of jobs tied to Ruehl.
The review of Ruehl, which opened in 2004, cost the company about $51 million in impairment charges in its first quarter. Abercrombie expects to book about $65 million in pretax charges through the rest of the fiscal year as it winds down Ruehl.
The company Wednesday also said it amended a credit agreement to exclude some Ruehl-related charges from requirements under its covenant with the lender and reduced its available credit to $350 million from $450 million.
Jeffries said the company is confident is has sufficient cash on hand but “we believe it is prudent to make these changes” in light of the recession-battered retail environment and the one-time Ruehl costs.
In addition to the 29 Ruehl stores, Abercrombie runs 350 flagship stores and 733 others under the Abercrombie, Hollister Co. and Gilly Hicks nameplates.