2013-02-22 12:32:40 -
New Albany, Ohio, February 22, 2013: Abercrombie & Fitch Co. (NYSE: ANF) today
reported preliminary unaudited fourth quarter results which reflected net income
of $173.2 million and net income per diluted share of $2.15 for the fourteen
weeks ended February 2, 2013, compared to net income of $19.6 million and net
income per diluted share of $0.22 for the thirteen weeks ended January 28, 2012
under the retail method of accounting for inventory. Additionally, the Company
reported full year net income of $263.2 million and net income per diluted share
of $3.16 for the fifty-three weeks ended February 2, 2013, compared to net
income of $127.7 million and net income per diluted share of $1.43 for the
fifty-two weeks ended January 28, 2012 under the retail method.
The Company also
announced that it has changed its method of accounting for
inventory from the retail method to the cost method effective in the fourth
quarter. The Company believes it is useful to investors to provide the fourth
quarter and full year results under both the retail and cost methods of
accounting for inventory to assess the Company's performance in Fiscal 2012. For
more information about the change from the retail method to the cost method of
accounting for inventory, see "Cost Method of Accounting for Inventory" below
and the appendix to the investor presentation that will be available in the
"Investors" section of the Company's website at www.abercrombie.com at
approximately 8:00 AM, Eastern Time.
Under the cost method of accounting for inventory, the Company reported net
income of $157.2 million and net income per diluted share of $1.95 for the
fourteen weeks ended February 2, 2013, compared to restated net income of $45.8
million and restated net income per diluted share of $0.52 for the thirteen
weeks ended January 28, 2012. Under the cost method, the Company reported net
income of $237.0 million and net income per diluted share of $2.85 for the
fifty-three weeks ended February 2, 2013, compared to restated net income of
$143.9 million and restated net income per diluted share of $1.61 for the fifty-
two weeks ended January 28, 2012.
The results reported above under both the retail and cost methods include
charges as set out in the table below. The table below also shows adjusted net
income per diluted share under the retail method excluding such charges (a non-
GAAP financial measure) for the fiscal quarters and fiscal years ended February
2, 2013 and January 28, 2012.
Fourth Quarter
((1)) Fiscal Year ((1))
------------------- ------------------
2012 2011 2012 2011
Net income per diluted share under the
cost method on a GAAP basis $ 1.95 $ 0.52 $ 2.85 $ 1.61
Impact of the change in method of
accounting for inventory 0.20 (0.30 ) 0.31 (0.18 )
------------------- ------------------
Net income per diluted share under the
retail method $ 2.15 $ 0.22 $ 3.16 $ 1.43
Add back: Asset impairment charges 0.06 0.50 0.06 0.49
Add back: Asset write-downs - 0.10 - 0.10
Add back: Store closure and lease exit
charges - 0.13 - 0.13
Add back: Legal charges - 0.07 - 0.07
Add back: ARS charges - 0.10 - 0.09
------------------- ------------------
Net income per diluted share on a non-
GAAP basis under the retail method $ 2.21 $ 1.12 $ 3.22 $ 2.31
((1)) Non-GAAP financial measures should not be used as alternatives to net
income per diluted share and are also not intended to supersede or replace the
Company's GAAP financial measures. The Company believes it is useful to
investors to provide the non-GAAP financial measures to assess the Company's
performance.
Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie
& Fitch Co., said:
"We are very pleased with our results for the fourth quarter. Our record sales
were in line with our guidance coming into the quarter, and our earnings
significantly exceeded expectations due to a strong gross margin performance for
the quarter, allied with continued tight expense control.
Despite a challenging U.S. retail environment over the holiday period, our core
U.S. chain plus DTC comparable sales remained positive and we saw continued
sequential improvement in our international business. We come into 2013 feeling
very optimistic that we are well positioned to make continued strong progress
over the next few years and to drive our operating margin and return on invested
capital higher.
Our brands remain incredibly strong and resonant on a global basis. On the front
line of our business, our stores organization does a world-class job of
presenting those brands to the world, and we are well positioned to reap the
benefits from all of the investments we have made in systems over the past
couple of years, including continued strong growth in our DTC business."
Fourth Quarter Summary
Net sales for the fourteen weeks ended February 2, 2013 increased 11% to $1.469
billion from $1.329 billion for the thirteen weeks ended January 28, 2012. Total
U.S. sales, including direct-to-consumer sales, increased 1% to $976.4 million.
Total international sales, including direct-to-consumer sales, increased 34% to
$492.2 million. Total Company direct-to-consumer sales, including shipping and
handling, increased 26% to $266.4 million.
The Fiscal 2012 retail year includes a fifty-third week and therefore fourth
quarter comparable sales are compared to the fourteen week period ended February
4, 2012. The fourteenth week added approximately $62.8 million of sales to the
comparable base, being sales for the week ended February 4, 2012. Total
comparable sales for the quarter, including direct to consumer sales, decreased
1% with comparable store sales decreasing 4% and comparable direct to consumer
sales increasing by 17% relative to last year.
Comparable sales for the fourth quarter were flat for the U.S., with comparable
store sales decreasing by 1% and comparable direct to consumer sales up 5%.
Comparable sales for the fourth quarter decreased 3% for international, with
comparable store sales decreasing by 14% and comparable direct to consumer sales
up 52%. The Company believes the change to include direct to consumer sales in
comparable sales is appropriate now that it has a more established comparable
sales base for its international direct to consumer operations.
By brand, comparable sales, including direct to consumer sales, were flat for
Abercrombie & Fitch, increased 4% for abercrombie kids, and decreased 2% for
Hollister Co. Total sales by brand were $541.3 million for Abercrombie & Fitch,
$128.7 million for abercrombie kids and $762.7 million for Hollister Co.
The gross profit rate under the retail method for the fourth quarter was
65.3%, 920 basis points higher than last year's fourth quarter gross profit
rate. The increase in the gross profit rate was primarily driven by a decrease
in average unit cost and the effect of higher markdowns on carryover inventory
in the prior year. The gross profit rate under the cost method for the fourth
quarter was 63.4%, 390 basis points higher than last year's restated fourth
quarter gross profit rate. The increase in the gross profit rate under the cost
method was primarily driven by a decrease in average unit cost.
Stores and distribution expense for the fourth quarter was $577.2 million, or
39.3% of net sales. Stores and distribution expense for the fourth quarter
included charges for impairments of $7.4 million. Excluding the effect of these
charges, the stores and distribution expense rate was 38.8% for the fourth
quarter of Fiscal 2012 compared to 37.7% last year excluding store-related asset
impairment and asset write-down charges and store closure and lease exit
charges. The increase in the stores and distribution expense rate was primarily
the result of deleveraging on negative comparable store sales plus higher direct
to consumer expense.
Marketing, general and administrative expense for the fourth quarter was $122.3
million, compared to $111.6 million during the same period last year. The fourth
quarter of Fiscal 2011 included $10.0 million in charges in connection with
legal settlements. The increase in marketing, general and administrative
expense was due to increases in incentive and other compensation related
expenses, IT, marketing and other expenses.
Other operating income for the fourteen weeks ended February 2, 2013 was $13.7
million compared to an expense of $7.6 million for the thirteen weeks ended
January 28, 2012. Other operating income for the fourteen weeks ended February
2, 2013 included income of $4.8 million related to business interruption
insurance recoveries associated with Superstorm Sandy. Other operating expense
for the thirteen weeks ended January 28, 2012 included expense of $13.4 million
related to a change in intent regarding auction rate securities.
Fiscal Year 2012 Summary
Net sales for the fifty-three weeks ended February 2, 2013 increased 8% to
$4.511 billion from $4.158 billion for the fifty-two weeks ended January
28, 2012. Total U.S. sales, including direct-to-consumer sales, decreased 1% to
$3.087 billion. Total international sales, including direct-to-consumer sales,
increased 36% to $1.424 billion. Total Company direct-to-consumer sales,
including shipping and handling, increased 27% to $700.7 million.
The Fiscal 2012 retail year includes a fifty-third week and therefore Fiscal
2012 comparable sales are compared to the fifty-three week period ended February
4, 2012. The fifty-third week added approximately $62.8 million of sales to the
comparable base, being sales for the week ended February 4, 2012. Total
comparable sales for the year, including direct to consumer sales, decreased 1%
with comparable store sales decreasing 5% and comparable direct to consumer
sales increasing by 24% relative to last year.
Comparable sales for the full year increased 1% for the U.S., with comparable
store sales decreasing by 1% and comparable direct to consumer sales up 15%.
Comparable sales for the full year decreased 8% for international, with
comparable store sales decreasing by 19% and comparable direct to consumer sales
up 46%.
For Fiscal 2012, comparable sales by brand, including direct to consumer sales,
decreased 3% for Abercrombie & Fitch, were flat for abercrombie kids, and
decreased 1% for Hollister Co. Total sales by brand for Fiscal 2012 were $1.704
billion for Abercrombie & Fitch, $382.5 million for abercrombie kids and $2.314
billion for Hollister Co.
The gross profit rate under the retail method for the fiscal year was
63.4%, 280 basis points higher than last year's gross profit rate. The increase
in the gross profit rate was primarily driven by a decrease in average unit cost
and the effect of higher markdowns on carryover inventory in the prior year. The
gross profit rate under the cost method for the fiscal year was 62.4%, 110 basis
points higher than last year's restated gross profit rate. The increase in the
gross profit rate was primarily driven by a decrease in average unit cost.
Stores and distribution expense for the fiscal year was $1.988 billion, or
44.1% of net sales. Stores and distribution expense for the full year included
charges for impairments of $7.4 million. Excluding the effect of these charges,
the stores and distribution expense rate was 43.9% for Fiscal 2012 compared to
43.0% last year excluding store-related asset impairment and asset write-down
charges and store closure and lease exit charges. The increase in the stores and
distribution expense rate was primarily the result of deleveraging on negative
comparable store sales plus higher direct to consumer expense.
Marketing, general and administrative expense for the fiscal year was $473.9
million, compared to $437.1 million during the comparable period last year.
Fiscal 2011 included $10.0 million in charges in connection with legal
settlements. The increase in marketing, general and administrative expense was
due to increases in incentive and other compensation related expenses, IT,
marketing and other expenses.
Other operating income for the fifty-three weeks ended February 2, 2013 was
$19.3 million compared to an expense of $3.5 million for the fifty-two weeks
ended January 28, 2012. Other operating income for the fifty-three weeks ended
February 2, 2013 included income of $4.8 million related to business
interruption insurance recoveries associated with Superstorm Sandy. Other
operating expense for the fifty-two weeks ended January 28, 2012 included a
charge of $13.4 million related to a change in intent regarding the auction rate
securities.
Fiscal 2012 total capital expenditures were $340 million, which consisted of
approximately $245 million for new stores, store refreshes and remodels, and
approximately $95 million related to information technology, distribution center
and other home office projects.
During Fiscal 2012, the Company repurchased 7.5 million shares of its common
stock at an aggregate cost of approximately $321.7 million, including 1.2
million shares of its common stock at an aggregate cost of approximately $56.2
million in the fourth quarter. As of February 2, 2013, the Company had
approximately 18.7 million shares remaining available for purchase under its
publicly announced stock repurchase authorizations.
The Company ended Fiscal 2012 with approximately $645.7 million in cash and cash
equivalents compared to $583.5 million in cash and cash equivalents and $99.5
million in marketable securities at the end of Fiscal 2011. During the fourth
quarter, the Company amended its Term Loan Agreement reducing the availability
from $300.0 million to $150.0 million. Including cash and equivalents, the
amended Term Loan Agreement and the availability of $350.0 million under the
Amended and Restated Credit Agreement, the Company had $1.146 billion in
available liquidity, less immaterial letters of credit, as of February 2, 2013.
On February 21, 2013, the Company elected to draw down the full $150.0 million
available under the Term Loan Agreement at an effective interest rate of 1.96%.
During Fiscal 2012, the Company opened 40 new international stores, three
domestic multi-branded outlet stores and closed 47 stores in the U.S. A summary
of store openings and closings for the fourteen and fifty-three week periods
ended February 2, 2013 is included with the financial statement schedules
following this release.
Cost Method of Accounting for Inventory
Historically, the Company has valued inventory utilizing the retail method of
accounting. Under the retail method, a cost-to-retail relationship was
established at the item level based upon weighted average cost and initial
retail selling price. The Company reduced the value of its inventory and
recorded a charge to cost of goods sold when the retail selling price was
permanently reduced so as to maintain the already established cost-to-retail
relationship. In addition, for inventory on hand at the end of a reporting
period, the Company reduced the inventory value by recording a valuation reserve
that represented future anticipated permanent reductions in retail selling
price. Under the cost method, the Company does not reduce the value of its
inventory or recognize any impact of permanent reductions to the retail selling
price in cost of goods sold unless the Company expects to sell the merchandise
below original cost. The Company believes the new methodology is preferable as
it better aligns with the Company's focus on realized selling margin and
improves the comparability of its financial results with those of its
competitors. The change is being applied retroactively to prior periods and the
Company has included a schedule of restated Consolidated Statements of of Income
for the year-to-date periods for Fiscal 2011 and Fiscal 2010 along with restated
quarterly Consolidated Statements of Income beginning with the first quarter of
Fiscal 2011. In connection with this change, the Company's annual 10-K filing
will be on the cost method with prior year figures restated accordingly.
Other Developments
On February 21, 2013, the Board of Directors declared a quarterly cash dividend
at the increased rate of $0.20 per share on the Class A Common Stock of
Abercrombie & Fitch Co. payable on March 19, 2013 to shareholders of record at
the close of business on March 4, 2013.
2013 Outlook
With regards to Fiscal 2013, the Company projects earnings per share in the
range of $3.35 to $3.45 under the cost method of accounting for inventory.
In Fiscal 2013, the Company expects to open Abercrombie & Fitch flagship
locations in Seoul and Shanghai, as well as approximately 20 international
Hollister stores throughout the year. The Company expects to close approximately
40-50 stores in the U.S. during 2013, primarily through natural lease
expirations.
Based on current new store plans and other planned expenditures, the Company
expects total capital expenditures for Fiscal 2013 to be approximately $200
million, predominately related to new stores and investments in IT initiatives.
An investor presentation of fourth quarter results will be available in the
"Investors" section of the Company's website at www.abercrombie.com at
approximately 8:00 AM, Eastern Time, today.
At the end of Fiscal 2012, the Company operated a total of 1,051 stores. The
Company operated 266 Abercrombie & Fitch stores, 144 abercrombie kids stores,
482 Hollister Co. stores and 20 Gilly Hicks stores in the United States. The
Company operated 19 Abercrombie & Fitch stores, six abercrombie kids stores,
107 Hollister Co. stores and seven Gilly Hicks stores internationally. The
Company operates e-commerce websites at www.abercrombie.com,
www.abercrombiekids.com, www.hollisterco.com and www.gillyhicks.com.
Today at 8:30 AM, Eastern Time, the Company will conduct a conference call.
Management will discuss the Company's performance and its plans for the future
and will accept questions from participants. To listen to the conference call,
dial (877) 548-7906 and ask for the Abercrombie & Fitch Quarterly Call or go to
www.abercrombie.com. The international call-in number is (719) 325-4795. This
call will be recorded and made available by dialing the replay number (888)
203-1112 or the international number (719) 457-0820 followed by the conference
ID number 9640252 or through www.abercrombie.com.
For further information, call:
ICR, Inc.
Joe Teklits
joseph.teklits@icrinc.com
203-682-8258
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
A&F cautions that any forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995) contained in this Press
Release or made by management of A&F involve risks and uncertainties and are
subject to change based on various factors, many of which may be beyond the
Company's control. Words such as "estimate," "project,"
"plan," "believe,"
"expect," "anticipate," "intend," and similar expressions may
identify forward-
looking statements. Except as may be required by applicable law, we assume no
obligation to publicly update or revise our forward-looking statements. The
following factors, in addition to those included in the disclosure under the
heading " FORWARD-LOOKING STATEMENTS AND RISK FACTORS" in "ITEM 1A. RISK
FACTORS" of A&F's Annual Report on Form 10-K for the fiscal year ended January
28, 2012, in some cases have affected and in the future could affect the
Company's financial performance and could cause actual results for the 2012
fiscal year and beyond to differ materially from those expressed or implied in
any of the forward-looking statements included in this Press Release or
otherwise made by management: changes in economic and financial conditions, and
the resulting impact on consumer confidence and consumer spending, could have a
material adverse effect on our business, results of operations and liquidity; if
we are unable to anticipate, identify and respond to changing fashion trends and
consumer preferences in a timely manner, and manage our inventory commensurate
with customer demand, our sales levels and profitability may decline;
fluctuations in the cost, availability and quality of raw materials, labor and
transportation, could cause manufacturing delays and increase our costs; equity-
based compensation awarded under the employment agreement with our Chief
Executive Officer could adversely impact our cash flows, financial position or
results of operations and could have a dilutive effect on our outstanding Common
Stock; our growth strategy relies significantly on international expansion,
which adds complexity to our operations and may strain our resources and
adversely impact current store performance; our international expansion plan is
dependent on a number of factors, any of which could delay or prevent successful
penetration into new markets or could adversely affect the profitability of our
international operations; our direct-to-consumer sales are subject to numerous
risks that could adversely impact sales; we have incurred, and may continue to
incur, significant costs related to store closures; our development of a new
brand concept such as Gilly Hicks could have a material adverse effect on our
financial condition or results of operations; fluctuations in foreign currency
exchange rates could adversely impact our financial condition and results of
operations; our business could suffer if our information technology systems are
disrupted or cease to operate effectively; comparable store sales may continue
to fluctuate on a regular basis and impact the volatility of the price of our
Common Stock; our market share may be negatively impacted by increasing
competition and pricing pressures from companies with brands or merchandise
competitive with ours; our stock price may be volatile and investors may not be
able to resell shares of our Common Stock at or above the price paid to acquire
the shares; our ability to attract customers to our stores depends, in part, on
the success of the shopping malls in which most of our stores are located; our
net sales fluctuate on a seasonal basis, causing our results of operations to be
susceptible to changes in Back-to-School and Holiday shopping patterns; our
inability to accurately plan for product demand and allocate merchandise
effectively could have a material adverse effect on our results; our failure to
protect our reputation could have a material adverse effect on our brands; we
rely on the experience and skills of our senior executive officers, the loss of
whom could have a material adverse effect on our business; interruption in the
flow of merchandise from our key vendors and international manufacturers could
disrupt our supply chain, which could result in lost sales and could increase
our costs; we do not own or operate any manufacturing facilities and, therefore,
depend upon independent third parties for the manufacture of all our
merchandise; our reliance on two distribution centers domestically and two
third-party distribution centers internationally makes us susceptible to
disruptions or adverse conditions affecting our distribution centers; our
reliance on third parties to deliver merchandise from our distribution centers
to our stores and direct-to-consumer customers could result in disruptions to
our business; we may be exposed to risks and costs associated with credit card
fraud and identity theft that would cause us to incur unexpected expenses and
loss of revenues; modifications and/or upgrades to our information technology
systems may disrupt our operations; our facilities, systems and stores, as well
as the facilities and systems of our vendors and manufacturers, are vulnerable
to natural disasters, pandemic disease and other unexpected events, any of which
could result in an interruption to our business and adversely affect our
operating results; our litigation exposure could have a material adverse effect
on our financial condition and results of operations; our inability or failure
to adequately protect our trademarks could have a negative impact on our brand
image and limit our ability to penetrate new markets; fluctuations in our tax
obligations and effective tax rate may result in volatility in our operating
results; the effects of war or acts of terrorism could have a material adverse
effect on our operating results and financial condition; our inability to obtain
commercial insurance at acceptable prices or our failure to adequately reserve
for self-insured exposures might increase our expenses and adversely impact our
financial results; operating results and cash flows at the store level may cause
us to incur impairment charges; we are subject to customs, advertising, consumer
protection, privacy, zoning and occupancy and labor and employment laws that
could require us to modify our current business practices, incur increased costs
or harm our reputation if we do not comply; changes in the regulatory or
compliance landscape could adversely affect our business and results of
operations; our unsecured Amended and Restated Credit Agreement (the "Amended
and Restated Credit Agreement") and our Term Loan Agreement include financial
and other covenants that impose restrictions on our financial and business
operations; our operations may be affected by regulatory changes related to
climate change and greenhouse gas emissions; and compliance with changing
regulations and standards for accounting, corporate governance and public
disclosure could adversely affect our business, results of operations and
reported financial results.
ER Financials Q4 2012 FINAL :
hugin.info/143831/R/1680301/548973.pdf
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originality of the information contained therein.
Source: Abercrombie & Fitch Co via Thomson Reuters ONE
[HUG#1680301]
