Board of Directors Declares Quarterly Dividend of $0.175 NEW
ALBANY, Ohio, Aug. 14 /PRNewswire-FirstCall/ -- Abercrombie &
Fitch Co. (NYSE:ANF) today reported unaudited second quarter
results which reflected a net loss of $26.7 million and a net loss
per basic and diluted share of $0.30 for the thirteen weeks ended
August 1, 2009, compared to net income of $77.8 million and net
income per diluted share of $0.87 for the thirteen weeks ended
August 2, 2008. The unaudited results also reflect a loss before
income taxes of $19.8 million for the thirteen weeks ended August
1, 2009, which includes pre-tax charges of $24.4 million associated
with the closure of RUEHL operations and related store asset
impairment charges as further described below. Second Quarter Sales
Highlights -- Total Company net sales decreased 23% to $648.5
million; comparable store sales decreased 30% -- Total Company
direct-to-consumer net sales decreased 13% to $48.7 million --
Abercrombie & Fitch net sales of $285.3 million; Abercrombie
& Fitch comparable store sales decreased 27% -- abercrombie net
sales of $71.5 million; abercrombie comparable store sales
decreased 29% -- Hollister Co. net sales of $274.3 million;
Hollister Co. comparable store sales decreased 33% -- RUEHL net
sales of $11.2 million; RUEHL comparable store sales decreased 31%
Mike Jeffries, Chief Executive Officer and Chairman of the Board of
Abercrombie & Fitch Co., said: "We continued to be confronted
with very challenging conditions during the second quarter. We
believe we are doing the right things to address those challenges
and improve our domestic business. In the meantime, we remain very
encouraged by our prospects for international growth." Second
Quarter 2009 Financial Results Net sales for the thirteen weeks
ended August 1, 2009 decreased 23% to $648.5 million from $845.8
million for the thirteen weeks ended August 2, 2008. Total Company
direct-to-consumer net sales decreased 13% to $48.7 million for the
thirteen week period ended August 1, 2009, compared to the thirteen
week period ended August 2, 2008. Total Company second quarter
comparable store sales decreased 30%. The gross profit rate for the
quarter was 66.5%, 360 basis points lower than last year's second
quarter gross profit rate. The decrease in gross profit rate was
primarily attributable to a higher markdown rate for the second
quarter this year compared to the second quarter last year. Stores
and distribution expense, as a percentage of sales, increased to
56.6% from 42.6%. Although the Company was able to achieve savings
in store payroll, direct-to-consumer and other variable expenses,
the reduction in those expenses was less than the rate of the sales
decline and not enough to offset increases in rent, depreciation
and other occupancy costs, as well as $23.0 million of net lease
termination related costs associated with the exit of RUEHL. Stores
and distribution expense for the second quarter also included RUEHL
store asset impairment charges of $0.8 million. Marketing, general
and administrative expense for the second quarter was $88.7 million
compared to $109.0 million during the same period last year. The
reduction in marketing, general and administrative expense includes
savings related to employee compensation and benefits, travel,
outside services and marketing. Marketing, general and
administrative expense for the quarter included $0.6 million of
severance charges associated with the exit of RUEHL. Operating loss
for the second quarter was $21.5 million, inclusive of $23.6
million pre-tax charges associated with the exit of RUEHL and $0.8
million related store asset impairment charges. Net interest income
for the second quarter was $1.8 million, flat compared to the same
period last year. Loss before income taxes for the second quarter
was $19.8 million, inclusive of $24.4 million pre-tax charges
associated with the exit of RUEHL and related store asset
impairment charges. Income tax expense for the second quarter was
$7.0 million, which was comprised of $11.5 million of expense
related to a true-up of the first quarter income tax provision and
$4.5 million of benefit associated with the second quarter loss
before income taxes. The income tax true-up, as calculated in
accordance with Financial Accounting Standards Interpretation No.
18, "Accounting for Taxes in Interim Periods," was the result of a
reduction of the estimated annual effective tax rate as determined
in the second quarter. The lower projected rate is primarily due to
a higher proportion of projected income before income taxes coming
from international operations with a lower overall effective rate,
and a lower proportion of projected income before income taxes
coming from domestic operations, partially resulting from the
second quarter charges associated with the closure of RUEHL. The
Company ended the second quarter with $366.5 million in cash and
cash equivalents, and outstanding debt and letters of credit of
$79.6 million. During the quarter, the Company repaid US dollar
denominated borrowings of $100 million outstanding under the credit
agreement and, separately, drew down approximately $37 million in
foreign currency denominated borrowings to fund international lease
and capital expenditure commitments. RUEHL Update As previously
announced, on June 16, 2009 the Board of Directors approved the
closure of the Company's 29 RUEHL branded stores and related
direct-to-consumer operations. The Company anticipates the closure
will be substantially complete by the end of the current fiscal
year. The Company continues to expect that it will incur aggregate
incremental net pre-tax charges to exit RUEHL of approximately $65
million, of which the Company incurred $23.6 million in the second
quarter. The estimate of total charges is based on a number of
significant assumptions and could change materially. The remaining
charges are expected to be substantially recognized during the
remaining two quarters of Fiscal 2009 in accordance with applicable
accounting standards. In addition to the $23.6 million exit costs,
the Company incurred store asset impairment charges related to
RUEHL of $50.7 million and $0.8 million in the first and second
quarters of Fiscal 2009, respectively. The unaudited results for
the quarter also include the operating results for RUEHL as
summarized in the table accompanying the financial statements
included with this release. Other Developments During the quarter,
the Company opened the first Epic Hollister flagship store, in New
York, as well as two Hollister mall-based stores in the United
Kingdom and one domestic abercrombie store. The Company remains on
track to open three international flagship stores in Fiscal 2009
including Abercrombie & Fitch and abercrombie in Milan and
Abercrombie & Fitch in Tokyo. Internationally, the Company
remains on track to open ten mall-based stores in Fiscal 2009,
including one abercrombie store in Canada and seven Hollister
stores in the United Kingdom. The Company also expects to open one
Hollister mall-based store in Germany and one in Italy.
Domestically, the Company plans to open nine mall-based stores in
Fiscal 2009, including two abercrombie stores, four Hollister
stores, one Gilly Hicks store and two outlet stores. The Company
now expects total capital expenditures for Fiscal 2009 to be
approximately $185 million, including approximately $140 million
related to new stores, store refreshes and remodels, and
approximately $45 million related to information technology,
distribution center and other home office projects. The reduction
in capital expenditures from the previously announced estimate of
$200 million is primarily a result of lower than expected
construction costs related to Fiscal 2009 store openings, timing
effects related to 2010 store openings, and the reduction and
postponement of non-essential projects related to existing stores.
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 September 15, 2009 to shareholders of record at the
close of business on August 28, 2009. At quarter end, the Company
operated 350 Abercrombie & Fitch stores, 210 abercrombie
stores, 510 Hollister Co. stores, 29 RUEHL stores and 16 Gilly
Hicks stores in the United States. The Company also operated three
Abercrombie & Fitch stores, three abercrombie stores and five
Hollister Co. stores in Canada, and one Abercrombie & Fitch
store and five Hollister Co. stores in the United Kingdom. The
Company operates e-commerce websites at
http://www.abercrombie.com/, http://www.abercrombiekids.com/,
http://www.hollisterco.com/, http://www.ruehl.com/ and
http://www.gillyhicks.com/. Today at 8:30 AM, 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 (888) 208-1507 or internationally at (913) 312-1522. To listen
via the Internet, go to http://www.abercrombie.com/, select the
Investors page and scroll through the 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 4106450; 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 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 1A.
RISK FACTORS" of A&F's Annual Report on Form 10-K for the
fiscal year ended January 31, 2009, in some cases have affected and
in the future could affect the Company's financial performance and
could cause actual results for the 2009 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: current financial crisis and general
economic conditions; 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; ability
to hire, train and retain associates; estimates of expenses which
the Company may incur in connection with the closure of the RUEHL
stores and related direct-to-consumer operations; 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. Condensed
Consolidated Statements of Operations (Unaudited) Thirteen Weeks
Ended August 1, 2009 and Thirteen Weeks Ended August 2, 2008 (in
thousands, except per share data) ACTUAL ACTUAL ------ ------ 2009
% of Sales 2008 % of Sales ---- ---------- ---- ---------- Net
Sales $648,459 100.0% $845,799 100.0% Cost of Goods Sold 217,456
33.5% 252,830 29.9% ------- ---- ------- ---- Gross Profit 431,003
66.5% 592,969 70.1% Total Stores and Distribution Expense 367,199
56.6% 360,719 42.6% Total Marketing, General and Administrative
Expense 88,671 13.7% 109,024 12.9% Other Operating Income, Net
(3,333) -0.5% (754) -0.1% ------ ---- ---- ---- Operating (Loss)
Income (21,534) -3.3% 123,980 14.7% Interest Income, Net (1,778)
-0.3% (1,757) -0.2% ------ ---- ------ ---- (Loss) Income Before
Income Taxes (19,756) -3.0% 125,737 14.9% Income Tax Expense 6,991
1.1% 47,905 5.7% Net (Loss) Income ($26,747) -4.1% $77,832 9.2%
-------- ---- ------- --- Net (Loss) Income Per Share: Basic
($0.30) $0.90 Diluted ($0.30) $0.87 Weighted-Average Shares
Outstanding: Basic 87,878 86,842 Diluted 87,878 89,963 Abercrombie
& Fitch Co. Condensed Consolidated Statements of Operations
(Unaudited) Twenty-Six Weeks Ended August 1, 2009 and Twenty-Six
Weeks Ended August 2, 2008 (in thousands, except per share data)
ACTUAL ACTUAL ------ ------ 2009 % of Sales 2008 % of Sales ----
---------- ---- ---------- Net Sales $1,260,595 100.0% $1,645,977
100.0% Cost of Goods Sold 441,908 35.1% 518,842 31.5% ------- ----
------- ---- Gross Profit 818,687 64.9% 1,127,135 68.5% Total
Stores and Distribution Expense 756,798 60.0% 702,507 42.7% Total
Marketing, General and Administrative Expense 181,208 14.4% 213,722
13.0% Other Operating Income, Net (4,668) -0.4% (3,695) -0.2%
------ ---- ------ ---- Operating (Loss) Income (114,651) -9.1%
214,601 13.0% Interest Income, Net (3,152) -0.3% (9,403) -0.6%
------ ---- ------ ---- (Loss) Income Before Income Taxes (111,499)
-8.8% 224,004 13.6% Income Tax (Benefit) Expense (25,512) -2.0%
84,056 5.1% Net (Loss) Income ($85,987) -6.8% $139,948 8.5%
-------- ---- -------- --- Net (Loss) Income Per Share: Basic
($0.98) $1.62 Diluted ($0.98) $1.55 Weighted-Average Shares
Outstanding: Basic 87,788 86,588 Diluted 87,788 90,051 Abercrombie
& Fitch Co. Condensed Consolidated Balance Sheets (in
thousands) (Unaudited) ASSETS August 1, 2009 January 31, 2009
------ -------------- ---------------- Current Assets Cash and
Equivalents $366,484 $522,122 Marketable Securities 59,698 -
Receivables 67,161 53,110 Inventories 325,596 372,422 Deferred
Income Taxes 50,654 43,408 Other Current Assets 111,631 93,763
------- ------ Total Current Assets 981,224 1,084,825 Property and
Equipment, Net 1,344,175 1,398,655 Marketable Securities 143,731
229,081 Other Assets 170,028 135,620 ------- ------- TOTAL ASSETS
$2,639,158 $2,848,181 ---------- ---------- LIABILITIES AND
SHAREHOLDERS' EQUITY ------------------------------------ Current
Liabilities Accounts Payable and Outstanding Checks $157,040
$149,753 Accrued Expenses 232,049 241,231 Deferred Lease Credits
45,787 42,358 Income Taxes Payable 1,412 16,455 Other Current
Liabilities 4,820 - ----- --- Total Current Liabilities 441,108
449,797 Long-Term Liabilities Deferred Income Taxes 12,698 34,085
Deferred Lease Credits 200,324 211,978 Debt 36,730 100,000 Other
Liabilities 207,040 206,743 ------- ------- Total Long-Term
Liabilities 456,792 552,806 Total Shareholders' Equity 1,741,258
1,845,578 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $2,639,158 $2,848,181 ---------- ---------- Abercrombie
& Fitch Co. Ruehl Operating Results (1) (Unaudited) (in
thousands) Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ---------------------- August 1, August 2,
August 1, August 2, 2009 2008 2009 2008 --------- ---------
--------- --------- NET SALES $11,237 $12,501 $21,644 $25,540 Cost
of Goods Sold 4,750 5,079 8,926 10,685 ----- ----- ----- ------
GROSS PROFIT 6,487 7,422 12,718 14,855 Stores and Distribution
Expense (2) 34,904 12,691 94,193 24,724 Marketing, General and
Administrative Expense (3) 2,005 3,601 8,196 7,313 Other Operating
Income, Net - (10) (11) (41) --- --- --- --- OPERATING LOSS
(30,422) (8,860) (89,660) (17,141) (1) The results include Ruehl
store and direct-to-consumer operating results and home office and
other costs directly attributable to Ruehl operations. (2) Stores
and Distribution Expense includes non-cash pre-tax asset impairment
charges of approximately $0.8 million and $48.5 million during the
thirteen and twenty-six weeks ended August 1, 2009, respectively.
Stores and Distribution Expense also includes net lease termination
related charges of approximately $23.0 million during the thirteen
and twenty-six weeks ended August 1, 2009. (3) Marketing, General
and Administrative Expense includes non-cash pre-tax asset
impairment charges of approximately $3.0 million during the
twenty-six weeks ended August 1, 2009. Marketing, General and
Administrative Expense also includes severance charges of
approximately $0.6 million during the thirteen and twenty-six weeks
ended August 1, 2009. DATASOURCE: Abercrombie & Fitch CONTACT:
Eric Cerny, Manager, Investor Relations, Abercrombie & Fitch,
+1-614-283-6385 Web Site: http://www.abercrombie.com/
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