ANF Abercrombie and Fitch Co

Fourth Quarter Net Income Up 58% to $164.6 Million; NEW ALBANY, Ohio, Feb. 14 /PRNewswire-FirstCall/ -- Abercrombie & Fitch Co. (NYSE:ANF) today reported unaudited results which reflected record net income of $164.6 million and net income per share on a fully-diluted basis of $1.80 for the fourth quarter ended January 28, 2006. The Company also reported net income of $334.0 million and net income per share on a fully-diluted basis of $3.66 for the fiscal year ended January 28, 2006. Net income per share for 2005 includes the after-tax effect of a previously reported third quarter non-recurring charge of $0.09 per fully- diluted share. Fourth Quarter Highlights - Total Company net sales increased 40% to $961.4 million; comparable store sales increased by 28% - Abercrombie & Fitch net sales increased 19% to $473.6 million; Abercrombie & Fitch comparable store sales increased by 18% - abercrombie net sales increased 57% to $121.8 million; abercrombie comparable store sales increased by 59% - Hollister net sales increased 71% to $358.9 million; Hollister comparable store sales increased by 34% - Net income for the fourth quarter of fiscal 2005 increased 58% to $164.6 million from $104.3 million in the fourth quarter of fiscal 2004 - Net income per share on a fully-diluted basis increased 57% to $1.80 in the fourth quarter of fiscal 2005 from $1.15 in the fourth quarter of fiscal 2004 - During the fourth quarter, the Company opened its Fifth Avenue Flagship store - During the fourth quarter, the Company opened five locations in Canada consisting of two Abercrombie & Fitch stores and three Hollister stores Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said: "Fiscal 2005 was an exceptional year for Abercrombie & Fitch, as we achieved record sales and earnings while enhancing the quality of our brands through strategic business investments. In addition to excellent financial results, fiscal 2005 marked the successful opening of our Fifth Avenue flagship store as well as the Company's initial expansion into international markets with the opening of Abercrombie & Fitch and Hollister stores in Canada. Our ongoing commitment to building quality in every aspect of the business gives me the confidence that we will continue our success through 2006 and beyond." Fourth Quarter and Fiscal Year 2005 Financial Results Net sales for the thirteen weeks ended January 28, 2006 increased 40% to $961.4 million compared to $687.3 million for the thirteen weeks ended January 29, 2005. Total Company comparable store sales increased 28% for the fourth quarter. Net sales for the fiscal year ended January 28, 2006 increased 38% to $2.785 billion versus $2.021 billion last year. Total Company comparable store sales increased 26% for fiscal 2005. The gross profit rate for the quarter was 66.5%, increasing 20 basis points compared to last year's rate of 66.3%. The increase in rate reflects an improved shrink rate and initial markup with little change in the markdown rate versus last year. For fiscal 2005, the gross profit rate was 66.5% versus 66.4% last year, an increase of 10 basis points. Stores and distribution expense for the quarter, as a percentage of sales, decreased 210 basis points to 30.5% versus 32.6% last year. The decrease in rate versus last year resulted from the Company's ability to leverage fixed costs due to significant comparable store sales increases, partially offset by increased store management and loss prevention programs. For fiscal 2005, stores and distribution expense, as a percentage of sales, decreased to 35.9% versus 36.5% last year. Marketing, general, and administrative expense for the fourth quarter, as a percentage of sales, decreased 120 basis points to 8.4% from 9.6% last year. The decrease in rate versus last year resulted from leveraging of marketing expense and home office payroll, partially offset by increased legal expense. For fiscal 2005, MG&A expense was 11.3% of sales, 160 basis points lower than last year's rate of 12.9%. Operating income for the fourth quarter increased 57% to $267.5 million compared to $170.2 million last year. For fiscal 2005, operating income was $542.7 million versus $347.6 million last year, an increase of 56%. Net income for the quarter increased 58% to $164.6 million versus $104.3 million last year. For fiscal 2005, net income increased 54% to $334.0 million versus $216.4 million last year. Net income per share on a fully-diluted basis for the fourth quarter was $1.80 versus $1.15, representing an increase of 57% versus last year. For fiscal 2005, net income per share on a fully-diluted basis increased 61% to $3.66 versus $2.28 last year. Net income per fully-diluted share for fiscal 2005 includes the effect of a third quarter non-recurring charge of $0.09 on an after-tax basis. Net income per fully-diluted share for fiscal 2004 includes the effect of a non-recurring charge of $0.27 on an after-tax basis. Fiscal 2006 Outlook The Company recently annualized strong comparable store sales growth which started in January of 2005, reporting a 33% comparable store sales increase in January of 2006. The Company believes the strong comparable store sales growth in January was due to a continuation of strong sales momentum, gift card redemptions, and the benefit of unseasonably warm temperatures. Consequently, the Company believes that while it can sustain positive comparable store sales increases, the increases will not be at the level reported over the past 13 months. The Company expects net income per fully-diluted share, for the first- half of fiscal 2006, to be in the range of $1.23 to $1.28, including a charge of approximately $0.08 attributable to the adoption of FAS 123(R). On a comparable non-GAAP basis, excluding 2006 expense related to FAS 123 (R), this would represent a 21% to 26% increase on a net income per share basis compared to last year. Reconciliation to GAAP measures of certain non-GAAP measures contained in this release is set forth in the attached schedule. The Company expects total capital expenditures for fiscal 2006 to be between $405 million and $415 million with approximately $260 million of this amount allocated to new store construction, store remodels, conversions, and improvements to existing stores, with the remainder related to home office and distribution center investments. For fiscal 2006, the Company expects to increase gross square-footage by approximately 11% primarily through the addition of 64 Hollister Co. stores, 19 abercrombie stores, 12 Abercrombie & Fitch stores and eight RUEHL stores. Other Developments For fiscal 2005, the Company repurchased 1.8 million shares of Class A Common Stock as part of its stock repurchase program. The Company has 5.7 million shares remaining under its existing repurchase authorization. On February 13, 2006, the Board of Directors declared a quarterly cash dividend of $0.175 per share on the Class A Common Stock of Abercrombie & Fitch Co. payable on March 21, 2006 to shareholders of record at the close of business on February 28, 2006. During fiscal 2005, the Company paid dividends totaling $0.60 per share to shareholders representing a 20% increase versus total dividends of $0.50 per share paid in fiscal 2004. The Company operated 361 Abercrombie & Fitch stores, 164 abercrombie stores, 318 Hollister stores, and eight RUEHL stores as of 2005 fiscal year- end. The Company operates e-commerce websites at http://www.abercrombie.com/, http://www.abercrombiekids.com/, and http://www.hollisterco.com/. Today at 4:30 PM, Eastern Time, the Company will conduct a conference call. Management will discuss the Company's performance, its plans for the future and will accept questions from participants. To listen to the live conference call, dial (800) 811-0667 or internationally at (913) 981-4901. To listen via the internet, go to http://www.abercrombie.com/, select the Investor Relations page and click on Calendar of Events. Replays of the call will be available shortly after its completion. The audio replay can be accessed for two weeks following the reporting date by calling (888) 203-1112 or internationally at (719) 457-0820 followed by the conference ID number 3097441; or for 12 months by visiting the Company's website at http://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, A&F's Form 10-K or made by management 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. The following factors, in addition to those included in the disclosure under the heading "FORWARD- LOOKING STATEMENTS AND RISK FACTORS" in "ITEM 1. BUSINESS" of A&F's Annual Report on Form 10-K for the fiscal year ended January 29, 2005, in some cases have affected and in the future could affect the Company's financial performance and could cause actual results 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 consumer spending patterns and consumer preferences; the effects of political and economic events and conditions domestically and in foreign jurisdictions in which the Company operates, including, but not limited to, acts of terrorism or war; the impact of competition and pricing; changes in weather patterns; postal rate increases and changes; paper and printing costs; market price of key raw materials; ability to source product from its global supplier base; political stability; currency and exchange risks and changes in existing or potential duties, tariffs or quotas; availability of suitable store locations at appropriate terms; ability to develop new merchandise; and ability to hire, train and retain associates, and the outcome of pending litigation. Future economic and industry trends that could potentially impact revenue and profitability are difficult to predict. Therefore, there can be no assurance that the forward-looking statements included in this Press Release will prove to be accurate. In light of the significant uncertainties in the forward- looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company, or any other person, that the objectives of the Company will be achieved. The forward-looking statements herein are based on information presently available to the management of the Company. Except as may be required by applicable law, the Company assumes no obligation to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. Abercrombie & Fitch Co. Consolidated Statements of Income (Unaudited) Thirteen Weeks Ended January 28, 2006 and Thirteen Weeks Ended January 29, 2005 (in thousands except per share data) ACTUAL ACTUAL % of % of 2005 Sales 2004 Sales Net Sales $961,392 100.0% $687,254 100.0% Cost of Goods Sold 321,974 33.5% 231,487 33.7% Gross Profit 639,418 66.5% 455,767 66.3% Stores and Distribution Expense 293,488 30.5% 223,833 32.6% Marketing, General and Administrative Expense 80,783 8.4% 66,076 9.6% Other Operating Income, Net (2,341) -0.2% (4,317) -0.6% Operating Income 267,488 27.8% 170,175 24.8% Interest Income, Net (2,376) -0.2% (1,299) -0.2% Income Before Income Taxes 269,864 28.1% 171,474 25.0% Income Tax Expense 105,240 10.9% 67,214 9.8% Effective Rate 39.0% 39.20% Net Income $164,624 17.1% $104,260 15.2% Net Income Per Share: Basic $1.88 $1.19 Fully-Diluted $1.80 $1.15 Weighted-Average Shares Outstanding Basic 87,647 87,640 Fully-Diluted 91,275 90,750 Abercrombie & Fitch Co. Condensed Consolidated Statements of Income (Unaudited) Fifty-two Weeks Ended January 28, 2006 and Fifty-two Weeks Ended January 29, 2005 (in thousands except per share data) ACTUAL ACTUAL % of % of 2005 Sales 2004 Sales Net Sales $2,784,711 100.0% $2,021,252 100.0% Cost of Goods Sold 933,295 33.5% 680,029 33.6% Gross Profit 1,851,416 66.5% 1,341,223 66.4% Stores and Distribution Expense 1,000,755 35.9% 738,244 36.5% Marketing, General and Administrative Expense 313,457 11.3% 259,834 12.9% Other Operating Income, Net (5,534) -0.2% (4,490) -0.2% Operating Income 542,738 19.5% 347,635 17.2% Interest Income, Net (6,672) -0.2% (5,218) -0.3% Income Before Income Taxes 549,410 19.7% 352,853 17.5% Income Tax Expense 215,426 7.7% 136,477 6.8% Effective Rate 39.2% 38.7% Net Income $333,984 12.0% $216,376 10.7% Net Income Per Share: Basic $3.83 $2.33 Fully-Diluted $3.66 $2.28 Weighted Average-Shares Outstanding Basic 87,161 92,777 Fully-Diluted 91,221 95,110 Abercrombie & Fitch Co. Condensed Consolidated Balance Sheets (in thousands) (unaudited) ASSETS January 28, 2006 January 29, 2005 Current Assets Cash and Cash Equivalents $68,031 $350,368 Marketable Securities 411,167 - Receivables 24,511 26,127 Inventories 362,536 211,198 Store Supplies 36,632 36,536 Deferred Income Taxes 21,854 31,246 Other Current Assets 35,112 28,048 Total Current Assets 959,843 683,523 Property and Equipment, Net 813,603 687,011 Other Assets 8,472 8,413 TOTAL ASSETS $1,781,918 $1,378,947 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts Payable and Outstanding Checks $145,313 $137,337 Accrued Expenses 215,034 205,153 Deferred Lease Credits 31,727 31,135 Income Taxes Payable 99,480 55,587 Total Current Liabilities 491,554 429,212 Long-Term Liabilities Debt - - Deferred Income Taxes 30,696 42,188 Deferred Lease Credits 191,225 177,923 Other Liabilities 73,326 60,298 Total Long-Term Liabilities 295,247 280,409 Total Shareholders' Equity 995,117 669,326 TOTAL LIABILITIES AND $1,781,918 $1,378,947 SHAREHOLDERS' EQUITY Abercrombie & Fitch Co. Non-GAAP Reconciliation Fiscal Year 2006 First Half Net Income Per Share Guidance Net Income Per Share FY 2006 Guidance: Fully-Diluted, as guided $1.23 $1.28 Expected FAS 123(R) Charge $0.08 $0.08 Non-GAAP Fully-Diluted, as guided $1.31 $1.36 Net Income Per Share FY 2005: Fully-Diluted, as reported $1.08 $1.08 First Half FY 2006 Net Income Per Share Percentage Increase 21% 26% Financial Results (Unaudited) Fifty-Two Weeks Ended January 28, 2006 and Fifty-Two Weeks Ended January 29, 2005 (in thousands except per share data) ACTUAL ACTUAL % of % of 2005 Sales 2004 Sales Marketing, General and Administrative Expense, as reported 313,457 11.3% 259,834 12.9% Non-Recurring Charge (13,462) -0.5% (40,900) -2.0% Non-GAAP Marketing, General and Administrative Expense 299,995 10.8% 218,934 10.8% Operating Income, as reported 542,738 19.5% 347,635 17.2% Non-Recurring Charge 13,462 0.5% 40,900 2.0% Non-GAAP Operating Income 556,200 20.0% 388,535 19.2% Net Income, as reported 333,984 12.0% 216,376 10.7% Non-Recurring Charge (tax effected at 39% and 38%, respectively) 8,212 0.3% 25,573 1.3% Non-GAAP Net Income 342,196 12.3% 241,949 12.0% Net Income Per Share: Basic, as reported $3.83 $2.33 Non-Recurring Charge $0.09 $0.28 Non-GAAP Basic $3.93 $2.61 Fully-Diluted, as reported $3.66 $2.28 Non-Recurring Charge $0.09 $0.27 Non-GAAP Fully-Diluted $3.75 $2.54 First Call Analyst: FCMN Contact: jill_swansegar@abercrombie.com DATASOURCE: Abercrombie & Fitch CONTACT: Thomas D. Lennox, Vice President, Corporate Communications of Abercrombie & Fitch, +1-614-283-6751 Web site: http://www.abercrombie.com/ http://www.abercrombiekids.com/

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