Overall net sales up 5%, with
Hollister net sales up 10%, driving operating expense leverage and
profit growth as strategic initiatives gain further traction
New Albany, Ohio,
November 17, 2017: Abercrombie & Fitch Co.
(NYSE: ANF) today reported GAAP net income per diluted share of
$0.15 for the third quarter ended October 28, 2017, compared to
GAAP net income per diluted share of $0.12 for the third quarter
last year. Excluding certain items, the company reported adjusted
non-GAAP net income per diluted share of $0.30 for the quarter,
compared to adjusted non-GAAP net income per diluted share of $0.02
last year.
Net Income Per Diluted Share Summary |
|
|
2017 (1) |
|
2016 (2) |
GAAP |
|
$0.15 |
|
$0.12 |
Excluded Items (3) |
|
(0.15) |
|
0.09 |
Adjusted Non-GAAP |
|
$0.30 |
|
$0.02 |
(1) Excluded
Items consist of legal charges of $11.1 million and store asset
impairment charges of $3.5 million.
(2) Excluded
Items consist of indemnification recovery benefits of $6.0
million.
(3) Excluded
Items are net of tax effect.
The favorable impact from
year-over-year changes in foreign currency exchange rates, net of
hedging, was approximately $0.01 per diluted share for the
quarter.
A description of the use of
non-GAAP financial measures and a schedule reconciling GAAP
financial measures to adjusted non-GAAP financial measures
accompanies this release.
Fran Horowitz, Chief Executive
Officer, said:
"We are pleased by the clear
progress across all brands, delivering another quarter of
sequential comparable sales improvement, and a return to positive
comparable sales. This sales performance in combination with
disciplined expense management drove profit growth, despite the
promotional environment. Our customers remain at the center of all
we do, and that singular focus continues to drive both our brands
forward, with effective engagement across all channels driving
positive overall traffic and conversion trends. Hollister delivered
another quarter of sales growth across all channels and
geographies, and Abercrombie is beginning to show signs of
stabilization.
We continue to execute on our
strategic plan, and we are positioned to compete in what we expect
to be a challenging and promotional fourth quarter. We maintain our
focus on driving operating expense leverage, while also making
strategic investments in marketing and omnichannel to meet our
customers' needs whenever, wherever and however they choose to
engage with our brands."
Third Quarter Sales
Results
Net sales for the third quarter
were $859.1 million, up 5% over last year, with comparable sales
for the third quarter up 4% and changes in foreign currency
exchange rates benefiting net sales by 1%.
Fiscal 2017 Comparable Sales Summary (1) |
Brand |
|
Geography |
|
|
First Quarter |
|
Second Quarter |
|
Third Quarter |
|
Year-to-Date |
|
|
|
First Quarter |
|
Second Quarter |
|
Third Quarter |
|
Year-to-Date |
Hollister |
|
3% |
|
5% |
|
8% |
|
6% |
|
United
States |
|
(3)% |
|
0% |
|
6% |
|
1% |
Abercrombie(2) |
|
(10)% |
|
(7)% |
|
(2)% |
|
(6)% |
|
International |
|
(2)% |
|
(1)% |
|
0% |
|
(1)% |
Total
Company |
|
(3)% |
|
(1)% |
|
4% |
|
0% |
|
Total
Company |
|
(3)% |
|
(1)% |
|
4% |
|
0% |
(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 increased 10% to $508.1
million for Hollister and decreased 2% to $351.0 million for
Abercrombie over last year.
By geography, net sales for the
third quarter increased 4% to $554.7 million in the U.S. and
increased 5% to $304.4 million in international markets over last
year.
Direct-to-consumer sales grew to
approximately 24% of total company net sales for the third quarter,
compared to approximately 23% of total company net sales last
year.
Additional Third
Quarter Results Commentary
The gross profit rate for the
third quarter was 61.3%, 80 basis points lower than last year on a
constant currency basis, as lower average unit cost was more than
offset by lower average unit retail.
Stores and distribution expense
for the third quarter was $375.9 million, down from $386.6 million
last year, as expense reductions were partially offset by
volume-related expenses from higher sales and changes in foreign
currency exchange rates.
Marketing, general and
administrative expense for the third quarter was $124.5 million, up
from $105.3 million last year. Excluding legal charges of $11.1
million this year and indemnification recovery benefits of $6.0
million last year, adjusted non-GAAP marketing, general and
administrative expense increased $2.2 million, as expense
reductions were more than offset by higher performance-based
compensation and marketing expenses.
Asset impairment for the third
quarter was $3.5 million and was excluded from adjusted
results.
Net other operating income for the
third quarter was $0.1 million, compared to $0.8 million last
year.
Operating income for the third
quarter was $22.7 million, compared to $19.6 million last year.
Excluding certain items, adjusted non-GAAP operating income for the
third quarter was $37.3 million, compared to $13.6 million last
year.
The effective tax rate for the
third quarter was 42%. Excluding certain items, the adjusted
non-GAAP effective tax rate for the third quarter was 36%.
Net income attributable to
Abercrombie & Fitch Co. for the third quarter was $10.1
million, compared to $7.9 million last year. Excluding certain
items, adjusted non-GAAP net income attributable to Abercrombie
& Fitch Co. for the third quarter was $20.5 million, compared
to $1.4 million last year.
The company ended the third
quarter with $459.3 million in cash and cash equivalents, and gross
borrowings under the company's term loan agreement of $268.3
million, compared to $469.7 million in cash and cash equivalents
and $293.3 million in borrowings last year.
The company ended the third
quarter with $570.5 million in inventory, an increase of 11% over
last year.
Other
Developments
As previously announced, on
November 14, 2017 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 11, 2017 to
stockholders of record at the close of business on December 1,
2017.
Outlook
For the fourth quarter of fiscal
2017, the company expects:
-
Comparable sales to be up low-single digits, and
net sales to be up mid- to high-single digits, including benefits
from the 53rd week and changes in foreign currency exchange
rates
-
The 53rd week to benefit net sales by
approximately $38 million and operating income by approximately $2
million
-
Changes in foreign currency exchange rates to
benefit net sales by approximately $20 million and operating income
by approximately $5 million, net of hedging
-
A gross profit rate down approximately 100 basis
points to last year's rate of 59.3%, in line with the third quarter
year-over-year decline
-
Operating expense, including other operating
income, to be down approximately 1% from $553.7 million last year,
with expense reductions partially offset by increases in
volume-related expenses from higher sales and the adverse effect
from changes in foreign currency exchange rates
-
The effective tax rate to be in the mid
30s
-
A weighted average diluted share count of
approximately 70 million shares, excluding the effect of potential
share buybacks
On a full year basis, the company
expects the effective tax rate to reflect a core tax rate in the
mid 30s, which is highly sensitive at lower levels of pre-tax
earnings. Additionally, the company expects the full year effective
tax rate to reflect discrete non-cash income tax charges of
approximately $11 million related to a change in share-based
compensation accounting standards.
The company now expects capital
expenditures to be approximately $110 million for the full year, up
from the company's prior expectation of $100 million.
In addition to the five stores
opened year to date, including two outlet stores, the company
expects to open four new full-price stores in the fourth quarter.
The company anticipates closing up to 60 stores in the U.S. by
year-end through natural lease expirations, including 14 stores
closed to date.
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) 627-6590 and ask for the Abercrombie
& Fitch Quarterly Call or go to www.abercrombie.com. The
international call-in number is (719) 325-4857. 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 5771918 or through www.abercrombie.com.
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 Standard Time, today.
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 undertake no obligation to publicly update or
revise any forward-looking statements. The following factors, in
addition to those disclosed in "ITEM 1A. RISK FACTORS" of A&F's
Annual Report on Form 10-K for the fiscal year ended
January 28, 2017 and in A&F's subsequently filed quarterly
reports on Form 10-Q, in some cases have affected, and in the
future could affect, the company's financial performance and could
cause actual results for Fiscal 2017 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; our inability to anticipate customer demand and changing
fashion trends and to manage our inventory commensurately could
adversely impact our sales levels and profitability; our market
share may be negatively impacted by increasing competition and
pricing pressures from companies with brands or merchandise
competitive with ours; direct-to-consumer sales channels are a
significant component 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 ability to conduct
business in international markets may be adversely affected by
legal, regulatory, political and economic risks; our inability to
successfully implement our strategic plans could have a negative
impact on our growth and profitability; our failure to protect our
reputation could have a material adverse effect on our brands; 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 reputation loss; fluctuations in foreign currency exchange
rates could adversely impact our financial condition and results of
operations; changes in the cost, availability and quality of raw
materials, labor, transportation and trade relations could cause
manufacturing delays and increase our costs; we depend upon
independent third parties for the manufacture and delivery of all
our merchandise, and a disruption of the manufacture or delivery of
our merchandise could result in lost sales and could increase our
costs; our ability to attract customers to our stores depends, in
part, on the success of the shopping malls or area attractions that
our stores are located in or around; 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; our reliance on DCs
makes us susceptible to disruptions or adverse conditions affecting
our supply chain; 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; extreme weather conditions and the seasonal
nature of our business may cause net sales to fluctuate and
negatively impact our results of 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; the impact of war or acts of terrorism could
have a material adverse effect on our operating results and
financial condition; changes in 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.
About Abercrombie & Fitch
Co.
Abercrombie &
Fitch Co. (NYSE: ANF) is a leading, global specialty retailer of
apparel and accessories for Men, Women and Kids through three
renowned brands. For 125 years, the iconic Abercrombie & Fitch
brand has outfitted innovators, explorers and entrepreneurs. Today,
the brand reflects the updated attitude of the 21 to 24-year old
customer, while remaining true to its heritage of creating expertly
crafted products with an effortless, American style. The Hollister
brand epitomizes the liberating and carefree spirit of the endless
California summer for the teen market. abercrombie kids creates
smart, playful apparel for children ages 5-14, celebrating the
wide-eyed wonder of childhood.
The brands share
a commitment to offering products of enduring quality and
exceptional comfort that allow consumers around the world to
express their own individuality and style. The Company
operates approximately 900 stores under these brands across North
America, Europe, Asia and the Middle East, as well as the
e-commerce sites www.abercrombie.com and
www.hollisterco.com.
Investor Contact: |
|
Media
Contact: |
|
|
|
Brian
Logan |
|
Ian
Bailey |
Abercrombie & Fitch |
|
Abercrombie & Fitch |
(614)
283-6877 |
|
(614)
283-6192 |
Investor_Relations@anfcorp.com |
|
Public_Relations@anfcorp.com |
Q3 2017 ER Financials
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq 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
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