Abercrombie & Fitch Co. (NYSE: ANF) reported third-quarter fiscal 2014 results before markets opened Wednesday. The specialty retailer posted adjusted diluted earnings per share (EPS) of $0.25 on revenues of $911 million. In the same period a year ago, the company reported an EPS loss of $0.20 on revenues of $1.03 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.41 and $916.03 million in revenues.

Same-store sales in the United States fell 10% and direct-to-consumer sales rose 5%, for a combined decline of 7%. Same-store sales internationally fell 22%, while direct sales rose 15%, for a combined decline of 15%. Same-store sales for the company fell 14%, direct sales rose 8% and combined sales fell 10%. Gross margin slipped from about 63% year-over-year to 62.2%, roughly flat sequentially.

Abercrombie lowered its fiscal year EPS guidance from a prior range of $2.15 to $2.35 to a new range of $1.50 to $1.65. The company did not provide guidance for the fourth quarter, but the consensus calls for EPS of $1.33 on revenues of $1.18 billion. The consensus EPS estimate for the second quarter was $0.72 three months ago. The consensus analysts’ estimates for the full year call for EPS of $1.74 and revenues of $3.81 billion. Those numbers are now ancient history.

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The company expects to open 12 full-price stores during the year (down from 14 at the end of the second quarter) and nine international and U.S. outlet stores. About 60 stores will be closed, in line with the previous estimate.

The company’s CEO said:

[O]ur third quarter results were disappointing in what remains a very challenging environment for young apparel. Comparable sales improved somewhat in November, and this improvement was maintained through the Black Friday weekend. However, we expect conditions to remain difficult through the balance of the fourth quarter. Longer term, we continue to believe we are taking the right steps to position the company for future success, including our shift to a branded structure, changes in our assortment and how we engage with our customer, investing in direct-to-consumer and omni-channel, expanding our international reach, closing underperforming stores, and continuing to reduce expense[s]. The aggregate impact of these changes represents a significant transformation for our company, and we are hopeful that the benefits will start to become evident as we move through 2015.

So, Abercrombie’s transformation is based on hope. That should work out very handsomely, but until then investors are shedding shares Wednesday morning.

Shares traded down about 5% at $26.50 in Wednesday’s premarket, below the 52-week range of $27.74 to $45.50. That low was set on Tuesday. The consensus target price for the shares was around $34.20 before the report.

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