2013-08-22 13:02:02 -
New Albany, Ohio, August 22, 2013: Abercrombie & Fitch Co. (NYSE: ANF) today
reported unaudited second quarter results which reflected net income of $11.4
million and net income per diluted share of $0.14 for the thirteen weeks ended
August 3, 2013, compared to net income of $17.1 million and net income per
diluted share of $0.20 for the thirteen weeks ended July 28, 2012. Net income
per diluted share for the thirteen weeks ended August 3, 2013 includes $0.02 in
charges related to the implementation of the on-going profit improvement
Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie
& Fitch Co., said:
"The second quarter was more difficult than expected due to weaker traffic and
continued softness in the female business, consistent with what others have
In that context we are planning sales, inventory and expenses
conservatively for the remainder of the year.
Despite the challenging environment, we are very pleased by strong growth in our
direct-to-consumer business and continued strong growth in China. We have also
made excellent progress on our profit improvement initiative during the quarter,
and we now expect savings from this initiative to exceed $100 million annually.
In addition, we are nearing completion of our long-term strategic review, and we
are confident that this will provide us with a clear roadmap for sustainable
growth in sales, profitability and return on invested capital."
Second Quarter Summary
Net sales for the thirteen weeks ended August 3, 2013 decreased 1% to $945.7
million from $951.4 million for the thirteen weeks ended July 28, 2012.
Including direct-to-consumer, total U.S. sales decreased 8% to $597.3 million.
Including direct-to-consumer, total international sales increased 15% to
$348.4 million. Total Company direct-to-consumer sales, including shipping and
handling, increased 21% to $154.3 million.
Total comparable sales for the quarter, including direct-to-consumer sales,
decreased 10% with comparable U.S. sales decreasing 11% and comparable
international sales decreasing 7%. Within the quarter, comparable sales were
weakest in July.
By brand, including direct-to-consumer, comparable sales decreased 6% for
Abercrombie & Fitch, decreased 3% for abercrombie kids, and decreased 13% for
Hollister Co. Total sales by brand were $356.6 million for Abercrombie & Fitch,
$76.0 million for abercrombie kids and $488.5 million for Hollister Co.
Due to the 53(rd) week in Fiscal 2012, second quarter comparable sales are
compared to the thirteen week period ended August 4, 2012. The thirteen week
period ended August 4, 2012 included approximately $44 million of additional
sales versus the reported thirteen-week period ended July 28, 2012.
The gross profit rate for the second quarter was 63.9%, 160 basis points higher
than last year's second quarter gross profit rate.
Stores and distribution expense for the second quarter was $471.7 million or
49.9% of net sales, up from $458.1 million or 48.1% of net sales last year. As
a percentage of sales, expense savings in store payroll, store management and
support and other stores and distribution expense were more than offset by the
deleveraging effect of negative comparable sales and higher direct-to-consumer
Marketing, general and administrative expense for the second quarter was $117.6
million, a 6% increase compared to $111.3 million last year. The increase in
marketing, general and administrative expense was primarily driven by increases
in consulting and other services, including $2.6 million in charges related to
the implementation of the profit improvement initiative.
The effective tax rate for the second quarter was 34.7% compared to 27.3% last
During the second quarter of Fiscal 2013, the Company repurchased approximately
2.0 million shares of its common stock at an aggregate cost of approximately
The Company ended the second quarter with approximately $335.0 million in cash
and cash equivalents, and borrowings under the Term Loan Agreement of $142.5
million, compared to $312.2 million in cash and cash equivalents, $20.1 million
in marketable securities, and $75.0 million in borrowings last year.
During the quarter, the Company opened four international Hollister chain
stores, including two stores in China. Additionally, the Company opened a
combined Abercrombie & Fitch and abercrombie kids outlet store in each of the
U.K. and U.S.
On August 20, 2013, the Board of Directors declared a quarterly cash dividend of
$0.20 per share on the Class A Common Stock of Abercrombie & Fitch Co. payable
on September 17, 2013 to shareholders of record at the close of business on
September 3, 2013.
Based on an assumption that third quarter comparable sales will be down slightly
more than second quarter, the Company projects third quarter diluted earnings
per share in the range of $0.40 to $0.45. The Company is not providing guidance
beyond the third quarter due to a lack of visibility given recent traffic
trends. The guidance does not include the impact of potential impairment and
store closure charges or additional charges related to the implementation of the
Company's profit improvement initiative.
The Company continues to anticipate opening an Abercrombie & Fitch flagship
store in Seoul, as well as approximately 20 international Hollister chain stores
throughout the year. In addition, the Company will open a small number of
international and U.S. outlet stores during the year. The Company continues to
expect to close approximately 40-50 stores in the U.S. during 2013 through
natural lease expirations. The planned opening of an Abercrombie & Fitch
flagship store in Shanghai is now expected in the spring of 2014.
Based on current new store plans and other planned expenditures, the Company
continues to expect 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 second quarter results will be available in the
"Investors" section of the Company's website at www.abercrombie.com at
approximately 7:30 AM, Eastern Time, today.
At the end of the second quarter, the Company operated a total of 1,057 stores.
The Company operated 265 Abercrombie & Fitch stores, 144 abercrombie kids
stores, 478 Hollister Co. stores and 20 Gilly Hicks stores in the United States.
The Company operated 20 Abercrombie & Fitch stores, six abercrombie kids
stores, 116 Hollister Co. stores and eight 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 8:00 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) 675-4756 and ask for the Abercrombie & Fitch Quarterly Call or go to
www.abercrombie.com. The international call-in number is (719) 325-4817. 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 1536564 or through www.abercrombie.com.
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 or spokespeople of A&F involve risks and
uncertainties and are subject to change based on various important 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
the fiscal year ended February 2, 2013, in some cases have affected and in the
future could affect the Company's financial performance and could cause actual
results for the 2013 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; changing fashion trends and consumer preferences, and
the ability to manage our inventory commensurate with customer demand, could
adversely impact our sales levels and profitability; fluctuations in the cost,
availability and quality of raw materials, labor and transportation, could cause
manufacturing delays and increase our costs; our growth strategy relies
significantly on international expansion, which requires significant capital
investment, 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 operations are subject to
numerous risks that could adversely impact sales; 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 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 sales,
including direct-to-consumer, 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 ability to
attract customers to our stores depends, in part, on the success of the shopping
malls or area attractions 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
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; in a number of our European stores, associates are
represented by workers' councils and unions, whose demands could adversely
affect our profitability or operating standards for our brands; we depend upon
independent third parties for the manufacture and delivery 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; 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; 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 and our Term Loan Agreement include financial and
other covenants that impose restrictions on our financial and business
operations; 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; and our inability to
implement our profit improvement plan across all work-streams could have a
negative impact on our financial results.
ER Financials Q2 2013 FINAL:
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Source: Abercrombie & Fitch Co via Thomson Reuters ONE