New Albany, Ohio,
May 28, 2015: Abercrombie & Fitch Co. (NYSE:
ANF) today reported unaudited first quarter financial results that
reflected a GAAP net loss of $63.2 million and net loss per diluted
share of $0.91 for the thirteen weeks ended May 2, 2015, compared
to a GAAP net loss of $23.7 million and net loss per diluted share
of $0.32 for the thirteen weeks ended May 3, 2014.
Excluding certain charges, the
Company reported an adjusted non-GAAP net loss of $37.2 million and
net loss per diluted share of $0.53 for the first quarter, compared
to an adjusted non-GAAP net loss of $13.0 million and net loss per
diluted share of $0.17 for the first quarter last year. The
year over year reduction in adjusted non-GAAP net loss per diluted
share included the adverse impact of foreign currency exchange
rates of approximately $0.13.
A reconciliation of the GAAP
financial measures to the non-GAAP financial measures is included
in a schedule accompanying the consolidated financial statements
with this release. As used in the release, "GAAP" refers to
accounting principles generally accepted in the United States of
America.
Arthur Martinez, Executive Chairman, said:
"During the quarter, the Company
continued to take major strides to revitalize its brands, enhance
performance, and position itself for a return to profitable
growth.
This includes significant changes
across our business, including augmenting our leadership team,
enhancing organizational structure and efficiency, addressing core
merchandise and design processes, and optimizing our store fleet by
adding stores in high potential markets while closing
under-performing stores. We are also moving forward on other core
elements of our strategy, including investing in omnichannel
capabilities. Importantly, we have focused the entire
organization on putting the customer at the center of everything we
do, particularly with regard to store experience and our
merchandise assortment.
We knew the first quarter was
going to be difficult due to a number of factors, both internal and
external and, most significantly, because many of the actions we
are taking to improve our business are in the early stages of
implementation and have not yet been fully realized.
However, we did see sequential
improvements in a number of areas during the quarter, most notably
within Hollister, and our comparable sales trend has continued to
improve in May. While our turnaround won't be accomplished
overnight, we believe the changes we are making will reinvigorate
our iconic brands and lead to meaningful and lasting
improvement."
First Quarter Sales
Results
($ in
millions) |
Net Sales |
|
% Change |
|
Comparable Sales(1) |
Abercrombie(2) |
$340 |
|
(12)% |
|
(9)% |
Hollister |
$369 |
|
(12)% |
|
(6)% |
Total Company(3) |
$709 |
|
(14)% |
|
(8)% |
(1) Comparable
sales are calculated on a constant currency basis and exclude Gilly
Hicks.
(2) Abercrombie
includes the Company's Abercrombie & Fitch and abercrombie kids
brands.
(3) Total
Company percentage change includes Gilly Hicks, which had $14.5
million in sales last year.
Net sales for the first quarter decreased 14% to
$709.4 million, driven by a comparable sales decline of 8% and an
adverse effect from changes in foreign currency exchange rates of
6%.
Net sales for the first quarter
decreased 11% to $448.9 million in the U.S. and 18% to $260.5
million internationally. Comparable sales for the first
quarter decreased 7% in the U.S. and 9% internationally.
On a sequential basis, Abercrombie comparable
sales declined slightly in both the U.S. and internationally, while
Hollister comparable sales improved in both the U.S. and
internationally, due to positive comparable sales in Asia and
broad-based sequential improvement in Europe, including in the
U.K.
Net sales from direct-to-consumer and omnichannel
grew to approximately 23% of the total company net sales in the
first quarter, compared to approximately 21% of total company net
sales last year.
Additional First
Quarter Results Commentary
The gross profit rate for the
first quarter was 58.0%, 420 basis points lower than last
year. Excluding certain charges, the gross profit rate for
the first quarter was 61.8%, 70 basis points higher than last year
on a constant currency basis, primarily due to lower average unit
cost. Gross profit included $26.9 million of charges in the
first quarter related to a write-down of the carrying value of
inventory to net realizable value, primarily in the U.S., as the
Company elected to accelerate the disposition of certain aged
merchandise that does not reflect the Company's prospective brand
positioning. The Company expects to incur additional
disposition-related charges of approximately $2 million in the
second quarter in connection with this election.
Stores and distribution expense
for the first quarter was $391.6 million, down from $417.6 million
last year. Excluding certain charges, stores and distribution
expense decreased $29.9 million, as a result of benefits from
changes in foreign currency exchange rates, as well as additional
expense reduction efforts identified during the quarter and the
realization of expense savings on lower sales. Stores and
distribution expense included $4.7 million of charges in the first
quarter, primarily related to lease termination and store closure
costs, as well as accelerated depreciation related to a decision to
discontinue the use of certain store fixtures in connection with
changes to the Abercrombie & Fitch and Hollister in-store
experiences, compared to $0.8 million of charges last year related
to the Company's profit improvement initiative. The Company
expects to incur additional accelerated depreciation and disposal
charges of approximately $2 million in the second quarter
associated with the decision to discontinue the use of certain
store fixtures.
In addition to accelerated
depreciation charges, the Company incurred asset impairment charges
of $6.1 million in the first quarter, of which $4.5 million
related to the decision to discontinue the use of certain store
fixtures and $1.6 million related to a further fair
value adjustment on the company owned aircraft currently held for
sale.
Marketing, general and
administrative expense for the first quarter was $107.5 million,
down from $123.6 million last year. Excluding certain
charges, marketing, general and administrative expense for the
first quarter decreased $8.6 million, primarily due to expense
savings associated with the Company's expense reduction efforts
during the quarter. Marketing, general and administrative
expense included $1.8 million of charges in the first quarter,
related to the Company's continuous profit improvement program,
compared to $9.2 million of charges last year, related to the
Company's profit improvement initiative and certain corporate
governance matters.
The Company recognized a
restructuring benefit of $1.6 million in the first quarter,
compared to a restructuring charge of $5.6 million last year,
associated with the closure of the Gilly Hicks stand-alone
stores.
Net other operating income was
$2.0 million for the first quarter, compared to $3.6 million last
year, which included insurance recoveries of $3.1 million.
The effective tax rate for the
first quarter was 33.3% compared to 29.3% last year. On an
adjusted non-GAAP basis, the effective tax rate for the first
quarter was 34.8%.
The Company ended the quarter with
$383.2 million in cash and cash equivalents, and gross borrowings
under the Company's term loan agreement of $298.5 million, compared
to $357.1 million in cash and cash equivalents and $131.3 million
in borrowings last year.
The Company ended the quarter with
$441.0 million in inventory at cost, a decrease of 9% versus last
year, which included the impact of the inventory write-down.
During the first quarter, the
Company opened two international Hollister chain stores, one
international Abercrombie & Fitch chain store and three U.S.
Abercrombie & Fitch outlet stores. A summary of store
openings and closings for the first quarter is included with the
financial statement schedules following this release.
Other
Developments
As previously announced, on May
21, 2015, 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 June 10, 2015 to stockholders of record at
the close of business on June 2, 2015.
Operating
Segments
During the first quarter, the
Company changed its operating segments to align with its recent
transition to a branded organizational structure. This
transition was substantially completed in the first quarter, and in
conjunction with the change, the Company determined its operating
segments to be Abercrombie (including Abercrombie & Fitch and
abercrombie kids) and Hollister, which have been aggregated into
one reportable segment.
Fiscal 2015
Outlook
The Company said it currently
expects:
-
Continued headwinds from foreign currency
exchange rates.
-
Continued sequential comparable sales
improvement into the second quarter and the second half of the
fiscal year.
-
Gross margin rate to be flat to slightly up,
driven by average unit cost reductions, partially offset by adverse
effects from current foreign currency exchange rates.
-
Operating expense now to be down year-over-year
by approximately $40 million, excluding the effects related to
changes in comparable sales, primarily as a result of additional
expense savings identified.
-
That over time, the sustainable tax rate to
return to the mid-to-upper 30's, upon the recovery of the Company's
profitability within the jurisdictions in which it operates. The
tax rate is expected to be elevated in Fiscal 2015 and remains
highly sensitive to the earnings mix by jurisdiction, particularly
at lower levels of profitability.
-
A weighted average diluted share count of
approximately 70 million shares, excluding the effect of potential
share buybacks.
-
Capital expenditures of approximately $150
million, which are prioritized toward new stores and store updates,
as well as direct-to-consumer and IT investments to support growth
initiatives.
The Company plans to open 17
full-price stores in fiscal 2015 in the key growth markets of
China, Japan and the Middle East and five full price stores in
North America. The Company expects to open nine new outlet
stores in the U.S. In addition, the Company anticipates
closing approximately 60 stores in the U.S. during the fiscal year
through natural lease expirations.
Excluded from the Company's full
year outlook are charges incurred during the quarter, as detailed
in the accompanying schedule of non-GAAP financial measures, as
well as other potential future charges related to impairment and
store closing charges and other potential charges related to our
restructuring efforts.
An investor presentation of first
quarter results will be available in the "Investors" section of the
Company's website at www.abercrombie.com at approximately 8:00 AM,
Eastern Daylight Savings Time, today.
About Abercrombie
& Fitch Co.
Abercrombie &
Fitch Co. is a leading global specialty retailer of high-quality,
casual apparel for Men, Women and kids with an active, youthful
lifestyle under its Abercrombie & Fitch, abercrombie kids and
Hollister Co. brands. At the end of the first quarter, the
Company operated 789 stores in the United States and 173 stores
across Canada, Europe, Asia, Australia and the Middle East. The
Company also operates e-commerce websites at www.abercrombie.com,
www.abercrombiekids.com and www.hollisterco.com.
Today at 8:30 AM,
Eastern Daylight Savings 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 (888)
554-1424 and ask for the Abercrombie & Fitch Quarterly Call or
go to www.abercrombie.com. The international call-in number
is (719) 325-2480. 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 3009135 or through www.abercrombie.com.
Investor Contact:
Brian Logan
Abercrombie & Fitch
(614) 283-6877
Investor_Relations@abercrombie.com
Media Contact:
Michael Scheiner
Abercrombie & Fitch
(614) 283-6192
Public_Relations@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 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 assume no obligation to publicly update or
revise our 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, 2015, in some cases have affected and in the
future could affect the Company's financial performance and could
cause actual results for fiscal 2015 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; the inability to manage our inventory commensurate with
customer demand and changing fashion trends could adversely impact
our sales levels and profitability; fluctuations in the cost,
availability and quality of raw materials, labor and
transportation, could cause manufacturing delays and increase our
costs; we are currently involved in a selection process for a new
Chief Executive Officer and if this selection process is delayed
our business could be negatively impacted; failure to realize the
anticipated benefits of our recent transition to a brand-based
organizational model could have a negative impact on our business;
a significant component of our growth strategy is international
expansion, which requires significant capital investment, the
success of which is dependent on a number of factors that could
delay or prevent the profitability of our international operations;
direct-to-consumer sales channels are a focus 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 inability to successfully implement our strategic
plans could have a negative impact on our growth and profitability;
fluctuations in foreign currency exchange rates could adversely
impact our financial condition and results of operations; 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 loss of revenues; our market share may be negatively impacted
by increasing competition and pricing pressures from companies with
brands or merchandise competitive with ours; our ability to attract
customers to our stores depends, in part, on the success of the
shopping malls or area attractions in which most of our stores are
located; our failure to protect our reputation could have a
material adverse effect on our brands; 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; we depend upon
independent third parties for the manufacture and delivery of all
our merchandise, a disruption of which could result in lost sales
and could increase our costs; our reliance on two distribution
centers domestically and third-party distribution centers
internationally makes us susceptible to disruptions or adverse
conditions affecting our distribution centers; we may be exposed to
liabilities under the Foreign Corrupt Practices Act, and any
determination that we violated the Foreign Corrupt Practices Act
could have a material adverse effect on our business; in a number
of our European stores, associates are represented by workers'
councils and unions, whose demands could adversely affect our
profitability or operating standards for our brands; 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; 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; 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.
Q1 2015 ER Financial Statements
FINAL
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX 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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