Abercrombie & Fitch Co. Announces Third Quarter Earnings
Results NEW ALBANY, Ohio, Nov. 9 /PRNewswire-FirstCall/ --
Abercrombie & Fitch Co. (NYSE:ANF) today reported that net
income per share on a fully diluted basis for the third quarter
ended October 30, 2004 was $0.42, including the effect of a $0.22
per share non-recurring charge that reflects the settlement of
three related class action diversity lawsuits. Third Quarter
Highlights -- Total Company net sales increased 17%; Hollister net
sales increased 85%. -- The Company's gross income rate was 43.6%,
an increase of 230 basis points from last year's rate of 41.3%. --
The Company repurchased 5.4 million shares of Abercrombie &
Fitch Common Stock. -- The Board of Directors authorized the
repurchase of an additional 6 million shares of Abercrombie &
Fitch Common Stock. -- The Company launched RUEHL, its fourth
aspirational lifestyle brand, which targets the post college
customer aged 22 - 30. Mike Jeffries, Chief Executive Officer and
Chairman of the Board for Abercrombie & Fitch Co., said: "I am
extremely pleased with our progress in becoming the leading
aspirational casual brand company. I believe we are offering our
customer the best in-store experience together with outstanding
fashion. We intend to continue to pursue our strategy of avoiding
promotions. We have continued to make significant investments in
and valuable additions to our design and merchandising teams as
well as our store organization. At the same time, we have achieved
excellent sales growth coupled with significant margin improvement.
Overall, I believe each brand is well positioned for the long- term
and we are committed to growing our brands profitably in both the
United States and internationally." Financial Results Abercrombie
& Fitch Co. reported net sales for the thirteen weeks ended
October 30, 2004 increased 17% to $520.7 million from $445.0
million for the thirteen weeks ended November 1, 2003. Comparable
store sales increased 1% in the quarter. The gross income rate for
the quarter was 43.6%, up 230 basis points from last year's rate of
41.3%. Yesterday, the Company signed a consent decree settling the
class action diversity lawsuits, subject to judicial review and
approval. The monetary terms of the consent decree provide that the
Company will pay an aggregate amount of slightly less than $50
million to the class and for attorney's fees, costs and expenses to
carry out the settlement. As a result, the Company accrued a
non-recurring charge of $32.9 million, which was included in
selling, general and administrative ("SG&A") expense. This is
in addition to previously accrued amounts in connection with this
matter. As a consequence, reported net income per fully diluted
share in the third quarter was reduced by $0.22. Net income for the
quarter was $40.1 million compared to net income of $50.5 million
for the third quarter of fiscal 2003. Net income per share on a
fully diluted basis for the third quarter 2004 was $0.42 versus
$0.51 for the comparable period last year. During the third quarter
of 2004, the Company repurchased 5.4 million shares of Common Stock
as part of its stock repurchase program. The total cost of the
stock repurchase was $179.3 million, and resulted in the reduction
of the weighted average shares outstanding, which increased net
income per fully diluted share by approximately $0.01 for the
quarter. The Company said it would continue to focus on returning
capital, in excess of funds required to support the Company's
growth, to shareholders. The Company intends to manage its capital
structure by maintaining a base level of approximately $300 million
to $350 million in cash. Other Developments During the third
quarter, Abercrombie & Fitch management continued its efforts
and investment programs for the development of all its brands.
Abercrombie & Fitch secured a highly prestigious location for a
17,000 selling square foot flagship store on the corner of 5th
Avenue and 56th Street in New York, which it plans to open in the
fall of 2005. This store is not only expected to achieve
significant sales volume, but also provide a highly visible
presence that will enhance the Abercrombie & Fitch brand image
to both domestic and international customers. The Company initiated
a store investment program aimed at improving the in-store
experience for its customers by increasing associate coverage on
the selling floor. The Company will continue to invest in its
stores to preserve the aspirational environment of its brands.
Hollister successfully introduced live video coverage from
Huntington Beach, Surf City USA, in selective stores. This
initiative, which has been extremely well received by customers,
contributes to strengthening the powerful association of the
Hollister brand with California. During the month of September, the
Company launched its fourth brand, RUEHL, with the opening of three
stores in the Garden State Plaza in Paramus, New Jersey,
International Plaza in Tampa, Florida and the Woodfield Shopping
Center in Chicago, Illinois. Fourth Quarter Outlook The Company is
cautious in its outlook for the fourth quarter. Assuming sales
growth of approximately 12%, which would imply flat comparable
store sales, net income for the fourth quarter ending January 29,
2005, would be similar to last year's net income. The Company
operated 363 Abercrombie & Fitch stores, 174 abercrombie
stores, 224 Hollister Co. stores and 3 RUEHL stores at the end of
the third quarter 2004. The Company operates e-commerce websites at
http://www.abercrombie.com/, http://www.abercrombiekids.com/, and
http://www.hollisterco.com/ . Today at 9:30 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 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 627270; 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
"RISK FACTORS" in "ITEM 1. BUSINESS" of A&F's Annual Report on
Form 10-K for the fiscal year ended January 31, 2004, in some cases
have affected and in the future could affect the Company's
financial performance and could cause actual results for the 2004
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: 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. Condensed
Consolidated Statements of Income (Unaudited) Thirteen Weeks Ended
October 30, 2004 and Thirteen Weeks Ended November 1, 2003 (in
thousands except per share data) ACTUAL ACTUAL % of % of 2004 Sales
2003 Sales Net Sales $520,724 100.0% $444,979 100.0% Gross Income
226,836 43.6% 183,865 41.3% Gen'l, Admin. & Store Oper. Exp.
164,559 31.6% 102,415 23.0% Operating Income 62,277 12.0% 81,450
18.3% Interest Income, Net (1,574) -0.3% (757) -0.2% Income Before
Income Taxes 63,851 12.3% 82,207 18.5% Income Tax Expense 23,760
4.6% 31,750 7.1% Effective Rate 37.2% 38.6% Net Income $40,091 7.7%
$50,457 11.3% Net Income Per Share: Basic $0.43 $0.52 Diluted $0.42
$0.51 Weighted Average Shares Outstanding Basic 93,447 96,407
Diluted 95,351 99,102 Abercrombie & Fitch Co. Condensed
Consolidated Statements of Income (Unaudited) Thirty-nine Weeks
Ended October 30, 2004 and Thirty-nine Weeks Ended November 1, 2003
(in thousands except per share data) ACTUAL ACTUAL % of % of 2004
Sales 2003 Sales Net Sales $1,333,999 100.0% $1,147,421 100.0%
Gross Income 574,012 43.0% 456,386 39.8% Gen'l, Admin. & Store
Oper. Exp. 395,709 29.7% 279,030 24.3% Operating Income 178,303
13.4% 177,356 15.5% Interest Income, Net (3,919) -0.3% (2,610)
-0.2% Income Before Income Taxes 182,222 13.7% 179,966 15.7% Income
Tax Expense 69,600 5.2% 69,140 6.0% Effective Rate 38.2% 38.4% Net
Income $112,622 8.4% $110,826 9.7% Net Income Per Share: Basic
$1.19 $1.14 Diluted $1.17 $1.11 Weighted Average Shares
Outstanding: Basic 94,490 97,076 Diluted 96,522 100,095 Abercrombie
& Fitch Co. Condensed Consolidated Balance Sheets (in
thousands) (unaudited) ASSETS October 30, 2004 January 31, 2004
Current Assets Cash and Equivalents $443,406 $511,073 Marketable
Securities - 10,000 Receivables 20,027 7,197 Inventories 209,002
170,703 Store Supplies 35,432 29,993 Other 28,531 23,689 Total
Current Assets 736,398 752,655 Property and Equipment, Net 484,163
445,956 Other Assets 7,840 552 Total Assets $1,228,401 $1,199,163
LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts
Payable $138,740 $91,364 Accrued Expenses 200,337 138,232 Income
Taxes Payable 37,086 50,406 Total Current Liabilities 376,163
280,002 Long-Term Liabilities Debt - - Deferred Income Taxes 28,640
19,516 Other Long-Term Liabilities 32,135 28,388 Total Long-Term
Liabilities 60,775 47,904 Total Shareholders' Equity 791,463
871,257 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,228,401
$1,199,163 DATASOURCE: Abercrombie & Fitch CONTACT: Thomas D.
Lennox, Director, Investor Relations and Corporate Communications
of Abercrombie & Fitch Co., +1-614-283-6751 Web site:
http://www.abercrombie.com/ http://www.abercrombiekids.com/
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