Board of Directors Declares Quarterly Dividend of $0.175 NEW
ALBANY, Ohio, Nov. 13 /PRNewswire-FirstCall/ -- Abercrombie &
Fitch Co. (NYSE:ANF) today reported unaudited third quarter results
which reflected net income of $38.8 million and net income per
diluted share of $0.44 for the thirteen weeks ended October 31,
2009, compared to net income of $63.9 million and net income per
diluted share of $0.72 for the thirteen weeks ended November 1,
2008. Excluding $6.2 million of after-tax charges associated with
the closure of the Ruehl business and an $18.6 million benefit
associated with a true up of the year-to-date tax rate, the Company
reported non-GAAP net income of $26.3 million and non-GAAP net
income per diluted share of $0.30 for the thirteen weeks ended
October 31, 2009. A reconciliation of the GAAP to non-GAAP
financial measures is summarized in the table accompanying the
condensed consolidated financial statements included with this
press release. Third Quarter Sales Highlights -- Total Company net
sales decreased 15% to $765.4 million; comparable store sales
decreased 22% -- Total Company direct-to-consumer net sales
increased 11% to $63.9 million -- Abercrombie & Fitch net sales
of $324.3 million; Abercrombie & Fitch comparable store sales
decreased 18% -- abercrombie kids net sales of $90.8 million;
abercrombie kids comparable store sales decreased 22% -- Hollister
Co. net sales of $333.4 million; Hollister Co. comparable store
sales decreased 26% -- Ruehl net sales of $11.7 million; Ruehl
comparable store sales decreased 30% Mike Jeffries, Chief Executive
Officer and Chairman of the Board of Abercrombie & Fitch Co.,
said: "During the quarter, we made advances in our international
strategy with the opening of a flagship location in Italy as well
as additional Hollister mall-based stores in the United Kingdom.
The passion and enthusiasm from the international customer that
greeted us at these openings encourage us in our long-term strategy
of aggressively pursuing international growth for our brands."
Third Quarter 2009 Financial Results Net sales for the thirteen
weeks ended October 31, 2009 decreased 15% to $765.4 million from
$896.3 million for the thirteen weeks ended November 1, 2008. Total
Company direct-to-consumer net sales increased 11% to $63.9 million
for the thirteen week period ended October 31, 2009, compared to
the thirteen week period ended November 1, 2008. Total Company
third quarter comparable store sales decreased 22%. The gross
profit rate for the quarter was 63.6%, 240 basis points lower than
last year's third quarter gross profit rate. The decrease in gross
profit rate was primarily driven by a lower average unit retail,
partially off-set by a reduction in average unit cost and a benefit
from other gross margin items. Stores and distribution expense, as
a percentage of sales, increased to 48.3% from 43.1% for the same
period last year. The increase was attributable to higher store
occupancy costs, including rent, depreciation and other occupancy
costs, as well as $10.1 million of pre-tax charges associated with
the closure of the Ruehl business, primarily due to lease buy-out
costs. Marketing, general and administrative expense for the third
quarter was $88.1 million, compared to $105.0 million during the
same period last year. Marketing, general and administrative
expense reflects reductions related to employee compensation and
benefits, travel, outside services and marketing, and the benefit
of an insurance settlement. Income before income taxes for the
third quarter was $29.9 million, inclusive of $10.1 million pre-tax
charges associated with the closure of the Ruehl business. Income
tax benefit for the third quarter was $8.9 million. The third
quarter income tax provision reflects a benefit of $2.2 million,
primarily from the settlement of state tax audits, along with an
$18.6 million benefit associated with a true up of the year-to-date
tax rate. The Company has computed its provision for income taxes
for the three and nine months ended October 31, 2009 by applying
the actual effective tax rate to the year-to-date pre-tax loss. Net
income for the third quarter was $38.8 million, inclusive of $6.2
million of after-tax charges associated with the closure of the
Ruehl business and an $18.6 million benefit associated with the
true up of the year-to-date tax rate. As to liquidity, the Company
ended the third quarter with $466.9 million in cash and cash
equivalents, and borrowings under the credit agreement and
outstanding letters of credit of $95.9 million. 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 continues to
anticipate that the closure will be complete by the end of the
current fiscal year. As compared to the prior estimate of $65
million, the Company now expects that it will incur aggregate
pre-tax charges with a net present value of approximately $60
million to exit the Ruehl business, of which the Company incurred
$10.1 million in the third quarter and $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
fourth quarter of Fiscal 2009 in accordance with applicable
accounting standards. In addition to the $33.7 million in aggregate
net pre-tax exit costs incurred to date, the Company incurred
non-cash 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 third quarter also
include the operating results for Ruehl as summarized in the table
accompanying the condensed consolidated financial statements
included with this press release. Other Developments During the
quarter, the Company opened a flagship location in Milan with
Abercrombie & Fitch and abercrombie kids stores, as well as two
Hollister mall-based stores in the United Kingdom, one domestic
Hollister store and one domestic abercrombie kids store.
Internationally, the Company remains on track to open an
Abercrombie & Fitch flagship store in Tokyo in December as well
as an additional five Hollister mall-based stores in Europe during
the fourth quarter of Fiscal 2009 bringing the total European
Hollister store count to 12. The Company continues to expect total
capital expenditures for Fiscal 2009 to be approximately $185
million. These capital expenditures include approximately $45
million related to information technology, distribution center and
other home office projects, a substantial portion of which relates
to systems to support the Company's international roll-out. In
Fiscal 2010, the Company expects to open Abercrombie & Fitch
flagship stores in Copenhagen, Denmark and Fukuoka, Japan.
Additionally, the Company will open a Hollister Epic on Fifth
Avenue in New York where it had previously been planning to open an
abercrombie kids flagship. 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 December 15, 2009
to shareholders of record at the close of business on November 27,
2009. At quarter end, the Company operated 347 Abercrombie &
Fitch stores, 209 abercrombie kids stores, 509 Hollister Co.
stores, 27 Ruehl stores and 16 Gilly Hicks stores in the United
States. The Company also operated three Abercrombie & Fitch
stores, three abercrombie kids stores and six Hollister Co. stores
in Canada, one Abercrombie & Fitch store and seven Hollister
Co. stores in the United Kingdom and one Abercrombie & Fitch
store and one abercrombie kids store in Italy. 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 and its plans for
the future and will accept questions from participants. To listen
to the live conference call, dial (888) 637-7707 or internationally
at (913) 312-0405. 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 7444736; 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; effects of changes in the U.S. credit and
lending market 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; shipping rate increases and changes; availability
and market prices 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 qualified 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 October 31, 2009 and Thirteen Weeks Ended November 1, 2008
(in thousands, except per share data) ACTUAL ACTUAL
--------------------- --------------------- 2009 % of Sales 2008 %
of Sales Net Sales $765,401 100.0% $896,344 100.0% Cost of Goods
Sold 278,471 36.4% 304,401 34.0% ------- ---- ------- ---- Gross
Profit 486,930 63.6% 591,943 66.0% Total Stores and Distribution
Expense 370,064 48.3% 386,545 43.1% Total Marketing, General and
Administrative Expense 88,123 11.5% 104,959 11.7% Other Operating
(Income) Loss, Net (1,609) -0.2% 299 0.0% ------ ---- --- ---
Operating Income 30,352 4.0% 100,140 11.2% Interest Expense
(Income), Net 461 0.1% (560) -0.1% --- --- ---- ---- Income Before
Income Taxes 29,891 3.9% 100,700 11.2% Tax (Benefit) Expense
(8,892) -1.2% 36,800 4.1% Net Income $38,783 5.1% $63,900 7.1%
------- --- ------- --- Net Income Per Share: Basic $0.44 $0.73
Diluted $0.44 $0.72 Weighted-Average Shares Outstanding: Basic
87,943 87,034 Diluted 88,730 88,806 Abercrombie & Fitch Co.
Condensed Consolidated Statements of Operations (Unaudited)
Thirty-nine Weeks Ended October 31, 2009 and Thirty-nine Weeks
Ended November 1, 2008 (in thousands, except per share data) ACTUAL
ACTUAL --------------------- --------------------- 2009 % of Sales
2008 % of Sales Net Sales $2,025,996 100.0% $2,542,321 100.0% Cost
of Goods Sold 720,379 35.6% 823,243 32.4% ------- ---- ------- ----
Gross Profit 1,305,617 64.4% 1,719,078 67.6% Total Stores and
Distribution Expense 1,126,862 55.6% 1,089,052 42.8% Total
Marketing, General and Administrative Expense 269,331 13.3% 318,681
12.5% Other Operating Income, Net (6,277) -0.3% (3,396) -0.1%
------ ---- ------ ---- Operating (Loss) Income (84,299) -4.2%
314,741 12.4% Interest Income, Net (2,691) -0.1% (9,963) -0.4%
------ ---- ------ ---- (Loss) Income Before Income Taxes (81,608)
-4.0% 324,704 12.8% Tax (Benefit) Expense (34,404) -1.7% 120,856
4.8% Net (Loss) Income (47,204) -2.3% $203,848 8.0% ------- ----
-------- --- Net (Loss) Income Per Share: Basic ($0.54) $2.35
Diluted ($0.54) $2.27 Weighted-Average Shares Outstanding: Basic
87,839 86,737 Diluted 87,839 89,636 Abercrombie & Fitch Co.
Condensed Consolidated Balance Sheets (in thousands) (Unaudited)
ASSETS October 31, 2009 January 31, 2009 ------ ----------------
---------------- Current Assets Cash and Equivalents $466,887
$522,122 Marketable Securities 55,985 - Receivables 73,994 53,110
Inventories 347,180 372,422 Deferred Income Taxes 82,034 43,408
Other Current Assets 108,624 93,763 ------- ------ Total Current
Assets 1,134,704 1,084,825 Property and Equipment, Net 1,318,864
1,398,655 Non-Current Marketable Securities 130,250 229,081 Other
Assets 180,526 135,620 ------- ------- TOTAL ASSETS $2,764,344
$2,848,181 ---------- ---------- LIABILITIES AND SHAREHOLDERS'
EQUITY ------------------------------------ Current Liabilities
Accounts Payable and Outstanding Checks $193,779 $149,753 Accrued
Expenses 224,955 241,231 Deferred Lease Credits 43,947 42,358
Income Taxes Payable 9,332 16,455 ----- ------ Total Current
Liabilities 472,013 449,797 Long-Term Liabilities Deferred Income
Taxes 40,495 34,085 Deferred Lease Credits 196,616 211,978
Borrowings under Credit Agreement 50,582 100,000 Other Liabilities
226,262 206,743 ------- ------- Total Long-Term Liabilities 513,955
552,806 Total Shareholders' Equity 1,778,376 1,845,578 ---------
--------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,764,344
$2,848,181 ---------- ---------- Abercrombie & Fitch Co. Ruehl
Operating Results (1) (Unaudited) (in thousands) Thirteen Weeks
Ended Thirty-nine Weeks Ended -----------------------
----------------------- October 31, November 1, October 31,
November 1, 2009 2008 2009 2008 NET SALES $11,717 $13,533 $33,361
$39,072 Cost of Goods Sold 7,874 6,555 16,800 17,240 ----- -----
------ ------ GROSS PROFIT 3,843 6,978 16,561 21,832 Stores and
Distribution Expense (2) 20,702 12,982 114,895 37,706 Marketing,
General and Administrative Expense (3) 256 3,584 8,452 10,897 Other
Operating Income, Net - (8) (11) (49) --- --- --- --- OPERATING
LOSS (17,114) (9,580) (106,774) (26,721) (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 $48.5 million during the
thirty-nine weeks ended October 31, 2009 and costs associated with
the closure of the Ruehl business, primarily due to net lease
terminations, of approximately $10.1 million and $33.1 million
during the thirteen and thirty-nine weeks ended October 31, 2009,
respectively. (3) Marketing, General and Administrative Expense
includes non-cash pre-tax asset impairment charges of approximately
$3.0 million and severance charges of approximately $0.6 million
during the thirty-nine weeks ended October 31, 2009. Reconciliation
of GAAP to non-GAAP financial measures This press release contains
non-GAAP financial measures reflecting adjustments to the Company's
net income and net income per diluted share for the thirteen and
thirty-nine weeks ended October 31, 2009. Provided in the tables
below are reconciliations between the relevant GAAP financial
measures and the non-GAAP financial measures contained in this
press release. As used herein, "GAAP" refers to accounting
principles generally accepted in the United States of America. The
Company believes that the non-GAAP financial measures presented in
the press release and below in the reconciliation tables are useful
to investors as they provide the ability to measure the Company's
operating performance and compare it against that of prior periods
without reference to the statement of operations impact of costs
and impairment charges associated with the closure of Ruehl branded
stores and related direct-to-consumer operations and the benefit
associated with the true-up of the year-to-date tax rate. These
non-GAAP financial measures should not be used as alternatives to
net income and net income per diluted share as indicators of the
ongoing operating performance of the Company and are also not
intended to supersede or replace the Company's GAAP financial
measures. Abercrombie & Fitch Co. Reconciliation of Net Income
Per Diluted Share on a GAAP Basis to Net Income Per Diluted Share
on a Non-GAAP Basis (Unaudited) Thirteen Weeks Ended October 31,
2009 (in thousands) Non-GAAP Adjustments Attributed to Benefit
Non-GAAP Associated with Adjustments True Up in GAAP Attributed
Year-to-Date Non-GAAP Amounts to Ruehl (1) Tax Rate (2) Amounts
-------- ------------ --------------- --------- Net Sales $765,401
- - $765,401 Cost of Goods Sold 278,471 - - 278,471 ------- --- ---
------- Gross Profit 486,930 - - 486,930 Total Stores and
Distribution Expense 370,064 10,094 - 359,970 Total Marketing,
General and Administrative Expense 88,123 - - 88,123 Other
Operating Income, Net (1,609) - - (1,609) ------ --- --- ------
Operating Income 30,352 (10,094) - 40,446 Interest Expense, Net 461
- - 461 --- --- --- --- Income Before Income Taxes 29,891 (10,094)
- 39,985 Tax (Benefit) Expense (8,892) (3,937) (18,609) 13,654
------ ------ ------- ------ Net Income $38,783 ($6,157) $18,609
$26,331 Net Income Per Share: Basic $0.44 $0.30 Diluted $0.44 $0.30
Weighted-Average Shares Outstanding: Basic 87,943 87,943 Diluted
88,730 88,730 (1) During the thirteen weeks ended October 31, 2009,
the Company recorded charges associated with the closure of Ruehl
branded stores and related direct-to-consumer operations. These
charges were primarily related to net lease termination costs. (2)
During the thirteen weeks ended October 31, 2009, the Company
recorded a benefit associated with the true up of the year-to-date
tax rate. Abercrombie & Fitch Co. Reconciliation of Net Loss
Per Diluted Share on a GAAP Basis to Net Income Per Diluted Share
on a Non-GAAP Basis (Unaudited) Thirty-Nine Weeks Ended October 31,
2009 (in thousands) Non-GAAP Adjustments Attributed to Charges
Non-GAAP Associated Adjustments with Attributed to the Closure
Non-Cash Asset GAAP of the Ruehl Impairment Non-GAAP Amounts
Business (1) Charges (2) Amounts ---------- ------------
-------------- ---------- Net Sales $2,025,996 - - $2,025,996 Cost
of Goods Sold 720,379 - - 720,379 ------- --- --- ------- Gross
Profit 1,305,617 - - 1,305,617 Total Stores and Distribution
Expense 1,126,862 33,108 48,517 1,045,237 Total Marketing, General
and Administrative Expense 269,331 613 3,019 265,699 Other
Operating Income, Net (6,277) (6,277) ------ ------ Operating
(Loss) Income (84,299) (33,721) (51,536) 958 Interest Income, Net
(2,691) (2,691) ------ ------ (Loss) Income Before Income Taxes
(81,608) (33,721) (51,536) 3,649 Tax Benefit (34,404) (13,151)
(20,099) (1,154) ------- ------- ------- ------ Net (Loss) Income
($47,204) $(20,570) $(31,437) $4,803 Net (Loss) Income Per Share:
Basic ($0.54) $0.05 Diluted ($0.54) $0.05 Weighted-Average Shares
Outstanding: Basic 87,839 87,839 Diluted 87,839 87,839 (1) During
the thirty-nine weeks ended October 31, 2009, the Company recorded
charges associated with the closure of Ruehl branded stores and
related direct-to-consumer operations. These charges were primarily
related to net lease termination and severance costs. (2) During
the thirty-nine weeks ended October 31, 2009, the Company recorded
non-cash asset impairment charges related to the closure of Ruehl
branded stores and related direct-to-consumer operations.
DATASOURCE: Abercrombie & Fitch Co. CONTACT: Eric Cerny,
Manager, Investor Relations, +1-614-283-6385 Web Site:
http://www.abercrombie.com/
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