New Albany, Ohio,
March 4, 2015: Abercrombie & Fitch Co. (NYSE:
ANF) today reported unaudited fourth quarter financial results that
reflected GAAP net income of $44.4 million and net income per
diluted share of $0.63 for the thirteen weeks ended January 31,
2015, compared to GAAP net income of $66.1 million and net income
per diluted share of $0.85 for the thirteen weeks ended February 1,
2014. Additionally, the Company reported full year GAAP net
income of $51.8 million and net income per diluted share of $0.71
for the fifty-two week period ended January 31, 2015, compared to
GAAP net income of $54.6 million and net income per diluted share
of $0.69 for the fifty-two week period ended February 1, 2014.
Excluding certain charges, the
Company reported adjusted non-GAAP net income of $80.8 million and
net income per diluted share of $1.15 for the fourth quarter,
compared to adjusted non-GAAP net income of $104.3 million and net
income per diluted share of $1.34 for the fourth quarter last
year. Additionally, the Company reported non-GAAP net income
of $112.3 million and net income per diluted share of $1.54 for the
full year, compared to non-GAAP net income of $150.6 million and
net income per diluted share of $1.91 for the full year last
year.
A reconciliation of the GAAP
financial measures to the non-GAAP financial measures is included
in a table accompanying the consolidated financial statements with
this release. As used in the release, "GAAP" refers to
accounting principles generally accepted in the United States of
America.
Arthur Martinez, Executive
Chairman, said:
"2014 was a year of significant
change for Abercrombie & Fitch. I believe these changes
put us on the right path to improve profitability and deliver value
to shareholders. Our sales for the fourth quarter were
somewhat below expectations, but a slightly better gross margin
rate and strong expense management enabled us to deliver EPS within
our guidance range. For the full year, our results came in
well below our initial expectations, as an expected improvement in
comparable sales did not materialize, and further progress on
expense reduction was insufficient to offset weaker sales.
Our 2015 priorities are
clear. First, we need to improve comparable sales trends in
both our U.S. and international stores driven by an evolved
assortment and an increased focus on the customer experience.
Second, we will make further strategic investments in our
successful DTC and omni-channel business. Third, we will
continue to seek ways to reduce expenses and be more efficient.
Finally, we will selectively expand our international footprint in
high growth markets.
We expect the first half of 2015
to remain challenging, with declines in our logo business in 2014
persisting in the early part of 2015, but at reduced rates, as well
as significant currency pressure. However, we believe that
the benefits of all of the changes we have made will be reflected
in improved performance in the second half of the year."
Fourth Quarter Sales
Results
|
|
|
|
|
|
Comparable Sales* |
($ in
millions) |
Net Sales |
|
% Change |
|
Stores |
|
Direct-to-Consumer |
|
Total |
U.S. |
$ |
763 |
|
|
(10)% |
|
(10)% |
|
4% |
|
(6)% |
International |
$ |
357 |
|
|
(20)% |
|
(20)% |
|
(5)% |
|
(17)% |
Total
Company |
$ |
1,120 |
|
|
(14)% |
|
(13)% |
|
1% |
|
(10)% |
* Comparable sales are calculated on a constant
currency basis and exclude Gilly Hicks.
Net Sales for the fourth quarter decreased 14% to
$1.120 billion, driven by a 10% comparable sales decline, the
adverse effects of changes in foreign currency exchange rates of
approximately 3%, and net store closures.
On a sequential basis, store
comparable sales were in line with the prior quarter.
However, direct-to-consumer comparable sales decelerated
significantly in the fourth quarter, driven primarily by Europe,
where site traffic was down and shipping and other promotions drove
less of a conversion benefit than in prior quarters.
Net sales by brand for the fourth
quarter were $424.1 million for Abercrombie & Fitch, $100.7
million for abercrombie kids and $593.5 million for
Hollister. Comparable sales by brand, including
direct-to-consumer, decreased 9% for Abercrombie & Fitch,
decreased 6% for abercrombie kids, and decreased 11% for
Hollister.
Additional Fourth
Quarter Results Commentary
The gross profit rate for the
fourth quarter was 60.9%, 190 basis points higher than last year,
driven by lower average unit cost, partially offset by the adverse
effects of changes in foreign currency exchange rates.
Stores and distribution expense
for the fourth quarter was $445.6 million, down from $505.6 million
last year. Stores and Distribution expense included $4.0
million of charges in the fourth quarter, primarily related to
lease termination and store closure costs, compared to $0.5 million
of charges last year, primarily related to the Company's profit
improvement initiative. Excluding these charges, the stores
and distribution expense rate for the fourth quarter was 39.4% of
net sales, an increase of 50 basis points, compared to 38.9% of net
sales last year. Savings from the Company's profit
improvement initiative, largely in store payroll and other
controllable store expense, and benefits from changes in foreign
currency exchange rates, were more than offset by the deleveraging
effect of negative comparable sales and higher direct-to-consumer
expense.
Marketing, general and
administrative expense for the fourth quarter was $119.2 million,
up from $118.6 million last year. Marketing, general and
administrative expense included $5.3 million of charges in the
fourth quarter, primarily related to CEO transition costs, compared
to $3.2 million of charges last year, primarily related to the
Company's profit improvement initiative. Excluding these
charges, marketing, general and administrative expense for the
fourth quarter decreased $1.5 million, primarily due to a decrease
in compensation expense, partially offset by an increase in
marketing expense.
The Company incurred restructuring
charges in the fourth quarter of $2.4 million, compared to $36.8
million last year. Restructuring charges include asset
impairment, lease termination and other charges related to the
restructuring of the Gilly Hicks brand.
The Company incurred asset
impairment charges in the fourth quarter of $28.3 million, compared
to $3.1 million last year. Asset impairment charges related
to store assets whose carrying value exceeded fair value and, for
fiscal 2014, a decision to sell the Company owned aircraft.
Net other operating income was
$5.8 million for the fourth quarter, compared to $8.0 million last
year.
The effective tax rate for the
fourth quarter was 49.2% compared to 39.0% last year.
Excluding the effect of charges related to the restructuring of the
Gilly Hicks brand, asset impairments, store closures, CEO
transitions costs and the Company's profit improvement initiative,
the effective tax rate for the fourth quarter was 36.5%, compared
to 31.4% last year.
Full Year 2014
Sales Results
|
|
|
|
|
|
Comparable Sales* |
($ in
millions) |
Net Sales |
|
% Change |
|
Stores |
|
Direct-to-Consumer |
|
Total |
U.S. |
$ |
2,408 |
|
|
(9)% |
|
(9)% |
|
8% |
|
(6)% |
International |
$ |
1,336 |
|
|
(8)% |
|
(18)% |
|
13% |
|
(12)% |
Total
Company |
$ |
3,744 |
|
|
(9)% |
|
(12)% |
|
10% |
|
(8)% |
* Comparable sales are calculated
on a constant currency basis and exclude Gilly Hicks.
Net sales for the full year
decreased 9% to $3.744 billion, driven by an 8% comparable sales
decline, the adverse effects of changes in foreign currency
exchange rates, and net store closures.
Net sales by brand for the full
year were $1.450 billion for Abercrombie & Fitch, $321.4
million for abercrombie kids and $1.948 billion for
Hollister. Comparable sales by brand, including
direct-to-consumer, decreased 4% for Abercrombie & Fitch,
decreased 7% for abercrombie kids, and decreased 10% for
Hollister.
Additional Full
Year Results Commentary
The gross profit rate for the full
year was 61.8%, 80 points lower than last year, primarily driven by
increased promotional activity, including shipping promotions in
the direct-to-consumer business, partially offset by lower average
unit cost.
Stores and distribution expense
for the full year was $1.703 billion, down from $1.908 billion last
year. Stores and distribution expense included $8.3 million
of charges for the full year, primarily related to lease
termination and store closure costs and the Company's profit
improvement initiative, compared to $1.1 million of charges last
year, primarily related to the Company's profit improvement
initiative. Excluding these charges, the stores and
distribution expense rate for the full year was 45.3% of net sales,
a decrease of 100 basis points, compared to 46.3% of net sales last
year. Savings from the Company's profit improvement
initiative, largely in store payroll and other controllable store
expense, were partially offset by the deleveraging effect of
negative comparable sales and higher direct-to-consumer
expense.
Marketing, general and
administrative expense for the full year was $458.8 million,
compared to $481.8 million last year. Marketing, general and
administrative expense included $16.4 million in charges for the
full year, primarily related to CEO transition costs, corporate
governance matters, and the Company's profit improvement
initiative, compared to $12.7 million in charges last year,
primarily related to the Company's profit improvement
initiative. Excluding these charges, marketing, general and
administrative expense for the full year decreased $26.7 million,
primarily due to a decrease in compensation expense, partially
offset by an increase in marketing expense.
Restructuring charges for the full
year were $8.4 million, compared to $81.5 million last year.
Restructuring charges include asset impairment, lease termination
and other charges related to the restructuring of the Gilly Hicks
brand.
Asset impairment charges for the
full year were $45.0 million, compared to $46.7 million last
year. Asset impairment charges related to store assets whose
carrying value exceeded fair value and, for fiscal 2014, a decision
to sell the Company owned aircraft.
Net other operating income for the
full year was $15.2 million, compared to $23.1 million last
year. Net other operating income included $2.0 million of
foreign currency transaction losses for the full year, compared to
$2.9 million of foreign currency transaction gains last year.
Net other operating income also included insurance recoveries of
$10.2 million in fiscal 2014 and $9.0 million in fiscal 2013.
The effective tax rate for the
full year was 47.7%, compared to 25.5% last year. Excluding
the effect of charges related to the restructuring of the Gilly
Hicks brand, asset impairments, store closures, CEO transitions
costs, corporate governance matters and the Company's profit
improvement initiative, the effective tax rate for the full year
was 36.7%, compared to 30.1% last year. The tax rate for
fiscal 2013 included a benefit of $6.7 million related to certain
discrete tax matters.
The Company ended the year with
$530.2 million in cash and cash equivalents, and gross borrowings
under the Term Loan Agreement of $299.3 million, compared to $600.1
million in cash and cash equivalents and $135.0 million in
borrowings last year.
The Company ended the year with
$460.8 million in inventory at cost, a decrease of 13% versus last
year.
Total capital expenditures for the
full year were approximately $174.6 million, which consisted of
approximately $86.3 million related to new stores, store refreshes
and remodels, and approximately $88.3 million related to
information technology, distribution center and other home office
projects.
During the fiscal year, the
Company repurchased 7.3 million shares of its common stock at an
aggregate cost of approximately $285.0 million. As of
January 31, 2015, the Company had approximately 9.0 million
shares remaining available for purchase under its publicly
announced stock repurchase authorizations.
During the fiscal year, the
Company opened seven international Hollister chain stores, three
international Abercrombie & Fitch chain stores, including its
first in the Middle East, and opened a Hollister chain store and an
abercrombie kids chain store in the U.S. In addition, the
Company opened its first Abercrombie flagship store in Shanghai and
its first international abercrombie kids flagship store in
London. The Company also opened nine outlet stores during the
fiscal year, three internationally, in Europe and Asia, and six in
the U.S. In addition, the Company closed 52 U.S. stores,
including one Gilly Hicks store, seven international Gilly
Hicks stores and one Hollister outlet store in Spain.
A summary of store openings and
closings for the fourth quarter and the full year is included with
the financial statement schedules following this release.
Other
Developments
As previously announced, on
February 18, 2015, 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 March 11, 2015 to
stockholders of record at the close of business on March 3,
2015.
Outlook
The Company is providing the
following outlook on elements of its performance for fiscal
2015. As the Company gets greater visibility to the timing
and impact of its on-going strategic initiatives, it expects to
resume providing comparable sales and earnings per share
guidance.
The Company expects a significant
headwind from foreign currency exchange rates in fiscal 2015.
Recasting adjusted fiscal 2014 results using current exchange rates
would have reduced sales by approximately $135 million and
operating income, net of hedging, by approximately $60 million.
With regard to comparable sales,
the Company expects the negative impact from reduced logo sales to
modestly abate in the first half of the fiscal year and neutralize
in the second half of the fiscal year.
The Company expects gross margin
rate to be flat to slightly up for fiscal 2015, driven by average
unit cost reductions, offset by the adverse effect from foreign
currency exchange rates.
With regard to operating expense,
the Company expects the benefit from the effects of foreign
currency exchange rates, and savings from the profit improvement
initiative, to be offset by the restoration of normal incentive
compensation accruals, and increased investment in
direct-to-consumer and omni-channel.
The Company anticipates the full
year tax rate to be in the mid 40s, which reflects erosion in
European earnings, including the effect of changes in foreign
currency exchange rates.
Excluding the effect of potential
share buybacks, the Company is projecting a weighted average share
count of approximately 70 million shares.
Excluded from the Company's full
year outlook are potential impairment and store closing charges and
other potential charges related to its business transformation and
restructuring efforts.
The Company plans to open 15
full-price stores in fiscal 2015 in the key growth markets of
China, Japan and the Middle East and four full price stores in
North America. The Company also plans to open 11 new outlet
stores in the U.S. In addition, the Company anticipates
closing approximately 60 stores in the U.S. during the fiscal year
through natural lease expirations.
The Company is targeting capital
expenditures of approximately $150 million for the fiscal year,
which are prioritized toward new stores and store updates, as well
as direct-to-consumer and IT investments to support growth
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 Standard Time, today.
About Abercrombie
& Fitch Co.
Abercrombie &
Fitch Co. is a leading global specialty retailer of high-quality,
casual apparel for Men, Women and kids with an active, youthful
lifestyle under its Abercrombie & Fitch, abercrombie kids and
Hollister Co. brands. At the end of the fourth quarter, the
Company operated 799 stores in the United States and 170 stores
across Canada, Europe, Asia, Australia and the Middle East. The
Company also operates e-commerce websites at www.abercrombie.com,
www.abercrombiekids.com and www.hollisterco.com.
Today at 8:30 AM,
Eastern Standard 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 (888) 857-6930
and ask for the Abercrombie & Fitch Quarterly Call or go to
www.abercrombie.com. The international call-in number is
(719) 457-2646. 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 9529987
or through www.abercrombie.com.
Investor Contact:
Brian Logan
Abercrombie & Fitch
(614) 283-6877
Investor_Relations@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 10-K for
the fiscal year ended February 1, 2014, in some cases have affected
and in the future could affect the Company's financial performance
and could cause actual results for fiscal 2014 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; a significant component of our growth strategy is
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; we have increased the focus of our growth
strategy on direct-to-consumer sales channels and the failure to
successfully develop our position in these channels could have an
adverse impact on our results of operations; our direct-to-consumer
operations are subject to numerous risks that could adversely
impact sales, failure to successfully implement certain growth
initiatives may 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; extreme
weather conditions may negatively impact our results of operations;
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 increased 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 four third-party distribution centers internationally makes us
susceptible to disruptions or adverse conditions affecting our
distribution centers; we rely on third-party vendors as well as
other third-party arrangements for many aspects of our business and
the failure to successfully manage these relationships could
negatively impact our results of operations or expose us to
liability for the actions of third-party vendors acting on our
behalf; 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; actions of activist stockholders could have
a negative effect on our business; 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 asset-based revolving
credit facility and our Term Loan Facility 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; our inability to
successfully implement our long-range strategic plan could have a
negative impact on our growth and profitability and our estimates
of the expenses that we may incur in connection with the closures
of the Gilly Hicks stores could prove to be inaccurate.
Q4 2014 ER Financial Statements
FINAL
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Abercrombie & Fitch Co via Globenewswire
HUG#1899277
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