New Albany, Ohio,
November 20, 2015: Abercrombie & Fitch Co.
(NYSE: ANF) today reported GAAP net income per diluted share of
$0.60 for the thirteen weeks ended October 31, 2015, compared to
GAAP net income per diluted share of $0.25 for the thirteen weeks
ended November 1, 2014.
Excluding certain items, the
company reported adjusted non-GAAP net income per diluted share of
$0.48 for the third quarter, compared to adjusted non-GAAP net
income per diluted share of $0.42 for the third quarter last
year. Adjusted non-GAAP net income per diluted share included
year-over-year adverse effects from changes in foreign currency
exchange rates of approximately $0.13.
Both GAAP and non-GAAP net income
per diluted share for the quarter reflect benefits related to a
change in the estimated annual effective tax rate. In
addition, GAAP and non-GAAP net income per diluted share for the
quarter include discrete tax benefits of approximately $0.14 and
$0.11, respectively.
A reconciliation of GAAP financial
measures to non-GAAP financial measures is included in a schedule
accompanying the consolidated financial statements with this
release.
Arthur Martinez, Executive
Chairman, said:
"Our third quarter results
exceeded our expectations coming into the quarter and provide the
strongest validation yet that our initiatives are working. We
have seen positive customer response to the actions we have been
taking on a number of fronts. We saw continued sequential
improvement in comparable sales, led by positive comparable sales
for our Hollister brand and across our international
business. Our gross margin rate increased substantially
year-over-year, as promotional frequency and intensity were
moderated. Expense management remains aggressive. As a
result, adjusted operating income improved meaningfully on a
constant currency basis. Inventories remain well
controlled.
We recognize that we still have
much to achieve. We remain intensely focused on our strategic
initiatives and evolving our brands' positioning and assortments,
as well as improving our customer's experience.
As we look ahead in the fourth
quarter, there are mixed signals in the sector and we remain
cautious; however, we are confident that the work we are doing is
laying the foundation for long-term profitability and growth."
Third Quarter Sales
Results
Net sales for the third quarter,
at $878.6 million, were approximately flat on a constant currency
basis, but down 4% on a reported basis over the same period a year
ago.
Comparable sales for the third
quarter decreased 1%. On a sequential basis, comparable sales
trends improved across all brands and geographies.
Fiscal 2015 Comparable
Sales Summary (1) |
Brand |
|
Geography |
|
|
First Quarter |
|
Second Quarter |
|
Third Quarter |
|
Year-to-Date |
|
|
|
First Quarter |
|
Second Quarter |
|
Third Quarter |
|
Year-to-Date |
Abercrombie(2) |
|
(9)% |
|
(7)% |
|
(5)% |
|
(7)% |
|
United
States |
|
(7)% |
|
(4)% |
|
(3)% |
|
(5)% |
Hollister |
|
(6)% |
|
(1)% |
|
3% |
|
(2)% |
|
International |
|
(9)% |
|
(4)% |
|
1% |
|
(4)% |
Total
Company |
|
(8)% |
|
(4)% |
|
(1)% |
|
(4)% |
|
Total
Company |
|
(8)% |
|
(4)% |
|
(1)% |
|
(4)% |
(1) Comparable
sales are calculated on a constant currency basis.
(2) Abercrombie
includes the Abercrombie & Fitch and abercrombie kids
brands.
By brand, net sales for the third
quarter decreased 6% to $411.3 million for Abercrombie and were
approximately flat at $467.3 million for Hollister.
By geography, net sales for the
third quarter decreased 4% to $572.7 million in the U.S. and
decreased 3% to $305.8 million internationally.
Direct-to-consumer and omnichannel
sales comprised approximately 21% of total company net sales for
the quarter and grew in both the U.S. and internationally on a
constant currency basis over last year.
Additional Third
Quarter Results Commentary
The gross profit rate for the
third quarter was 63.7%. Excluding certain items, the
adjusted gross profit rate for the third quarter was 63.4%,
reflecting an improvement of 120 basis points on a reported basis
and 210 basis points on a constant currency basis over last year,
primarily due to higher average unit retails coupled with lower
average unit cost. Adjusted gross profit for the quarter
excluded a benefit of $2.6 million related to higher than expected
recoveries on the first quarter inventory write-down.
Stores and distribution expense
for the third quarter was $392.9 million, down from $413.6 million
last year. Excluding certain items, adjusted stores and
distribution expense decreased $18.8 million, primarily due to
benefits from changes in foreign currency exchange rates, as well
as expense reduction efforts, partially offset by higher
direct-to-consumer expense. Adjusted stores and distribution
expense for the quarter excluded $0.6 million of charges related to
accelerated depreciation and disposal costs from the discontinued
use of certain store fixtures, compared to $2.4 million of excluded
charges last year related to lease termination, store closure costs
and the company's profit improvement initiative.
Marketing, general and
administrative expense for the third quarter was $117.7 million, up
from $105.0 million last year, primarily due to higher compensation
related expense.
The company incurred asset
impairment charges in the third quarter of $12.1 million, compared
to $16.7 million last year, which were excluded from adjusted
results.
Net other operating income for the
third quarter was $3.9 million, which included $2.1 million of
insurance reimbursements, compared to $1.5 million last year.
The effective tax rate for the
third quarter was a benefit of 16%. Excluding certain items,
the adjusted effective tax rate for the quarter was an expense of
28%. Both the effective tax rate and the adjusted effective
tax rate reflect benefits related to a change in the estimated
annual effective tax rate. In addition, the effective tax
rate and the adjusted effective tax rate reflect discrete benefits
of $9.7 million and $7.7 million, respectively, related to a
release of a valuation allowance and other discrete tax items.
On a full year basis, the company expects the
adjusted effective tax rate to be in the mid-to-upper 30s,
including the discrete benefits noted above.
During the third quarter, the
company repurchased approximately 2.5 million shares of its common
stock at an aggregate cost of $50 million. As of October 31,
2015, the company had approximately 6.5 million shares remaining
available for purchase under its publicly announced stock
repurchase authorizations.
The company ended the quarter with
$405.6 million in cash and cash equivalents, and gross borrowings
under the company's term loan agreement of $297.0 million, compared
to $320.6 million in cash and cash equivalents and $300.0 million
in borrowings last year.
The company ended the quarter with
$601.5 million in inventory, a decrease of 3% versus last year,
which included a significant increase in inventory in-transit due
to a floorset shift. Excluding in-transit, inventory was down
10%.
During the quarter, the company
opened 13 new stores and closed two stores.
Other
Developments
On November 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
December 9, 2015 to stockholders of record at the close of business
on December 1, 2015.
Outlook
For the fourth quarter of fiscal
2015, the company expects:
-
Comparable sales to be approximately
flat.
-
Continued adverse effects from foreign currency
exchange rates.
-
Gross margin rate to be approximately flat to
last year on a constant currency basis.
-
Operating expense to be approximately flat to
last year after absorbing a provision for the restoration of
incentive compensation.
-
A weighted average diluted share count of
approximately 68 million shares, excluding effects of potential
share buybacks.
On a full year basis, the company
expects the adjusted effective tax rate to be in the mid-to-upper
30s, including discrete benefits relating to the release of a
valuation allowance and other discrete tax items recognized through
the third quarter. On a go-forward basis, the company expects
the annual effective tax rate to be in the upper 30s.
The company expects capital
expenditures of approximately $150 million for the full year.
In addition to the 23 new stores
opened year-to-date, the company expects to open eight new stores
in the fourth quarter, including six international stores and two
North American stores. In addition, the company anticipates
closing approximately 60 stores in the U.S. during the fiscal year
through natural lease expirations.
Excluded from the company's
outlook for the remainder of fiscal year 2015 are potential charges
related to impairments and store closings and other potential
charges related to its restructuring efforts and related tax
effects.
An investor presentation of third
quarter results will be available in the "Investors" section of the
company's website at www.abercrombie.com at approximately 8:00 AM,
Eastern Daylight 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 third quarter, the
company operated 790 stores in the United States and 175 stores
across Canada, Europe, Asia 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 (877) 856-1968
and ask for the Abercrombie & Fitch Quarterly Call or go to
www.abercrombie.com. The international call-in number is
(719) 325-4826. 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 8013718
or through www.abercrombie.com.
Investor Contact: |
|
Media
Contact: |
|
|
|
Brian
Logan |
|
Michael Scheiner |
Abercrombie & Fitch |
|
Abercrombie & Fitch |
(614)
283-6877 |
|
(614)
283-6192 |
Investor_Relations@abercrombie.com |
|
Public_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 January 31, 2015, in some cases have affected, and in
the future could affect, the company's financial performance and
could cause actual results for fiscal 2015 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 global economic and
financial conditions, and the resulting impact on consumer
confidence and consumer spending, as well as other changes in
consumer discretionary spending habits, could have a material
adverse effect on our business, results of operations and
liquidity; the inability to manage our inventory commensurate with
customer demand and changing fashion trends 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; we are currently involved in a selection process for a new
Chief Executive Officer and if this selection process is delayed
our business could be negatively impacted; failure to realize the
anticipated benefits of our recent transition to a brand-based
organizational model could have a negative impact on our business;
a significant component of our growth strategy is international
expansion, which requires significant capital investment, the
success of which is dependent on a number of factors that could
delay or prevent the profitability of our international operations;
direct-to-consumer sales channels are a focus of our growth
strategy, and the failure to successfully develop our position in
these channels could have an adverse impact on our results of
operations; our inability to successfully implement our strategic
plans, including our restructuring efforts, could have a negative
impact on our growth and profitability; 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; we may be exposed to risks and costs
associated with cyber-attacks, credit card fraud and identity theft
that would cause us to incur unexpected expenses and loss of
revenues; 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 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; we depend upon independent third
parties for the manufacture and delivery of all our merchandise, a
disruption of which could result in lost sales and could increase
our costs; our reliance on two distribution centers domestically
and third-party distribution centers internationally makes us
susceptible to disruptions or adverse conditions affecting our
distribution centers; we may be exposed to liabilities under the
Foreign Corrupt Practices Act, and any determination that we
violated the Foreign Corrupt Practices Act could have a material
adverse effect on our business; 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; 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 and regulatory compliance 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; extreme weather conditions and
the seasonal nature of our business may cause net sales to
fluctuate and negatively impact our results of operations; the
impact of war or acts of terrorism could have a material adverse
effect on our operating results and financial condition; changes in
and compliance with the regulatory or compliance landscape could
adversely affect our business and results of operations; our
Asset-Based Revolving Credit Agreement and our Term Loan Agreement
include restrictive covenants that limit our flexibility in
operating our business; 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.
Q3 2015 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#1968230
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