NEW ALBANY, Ohio, Aug. 15 /PRNewswire-FirstCall/ -- Abercrombie & Fitch
Co. (NYSE: ANF) today reported unaudited results which reflected second
quarter net income of $77.8 million and net income per diluted share of $0.87
for the thirteen weeks ended August 2, 2008, compared to net income of $81.3
million or net income per diluted share of $0.88 for the thirteen weeks ended
August 4, 2007.
Second quarter 2008 net income per diluted share of $0.87 includes $0.01
related to charges associated with the departure of a senior executive.
Second Quarter Highlights
-- Total Company net sales increased 5% to $845.8 million; comparable
store sales decreased 4%
-- Total direct-to-consumer net sales increased 23% to $55.9 million
-- Abercrombie & Fitch net sales increased 5% to $383.6 million;
Abercrombie & Fitch comparable store sales increased 3%
-- abercrombie net sales were $94.8 million, flat compared to last year;
abercrombie comparable store sales decreased 11%
-- Hollister Co. net sales increased 5% to $350.8 million; Hollister
comparable store sales decreased 9%
-- RUEHL net sales increased 7% to $12.5 million; RUEHL comparable store
sales decreased 22%
-- Net income for the second quarter decreased 4% to $77.8 million
-- Net income per diluted share in the second quarter decreased 1% to
$0.87
Mike Jeffries, Chief Executive Officer and Chairman of the Board of
Abercrombie & Fitch Co., said:
"Our second quarter financial results reflect difficult macroeconomic
conditions and a significant slowdown in consumer spending. However, we see
these challenging times as a great opportunity to place more distance between
us and the rest of specialty retail. We remain firmly committed to the
aspirational positioning of our brands and to building the foundation that
supports us as a truly multinational business. We will continue to focus on
what we do best ... providing the best casual lifestyle brands for our
customers by continuously elevating the quality of our product and the
emotional store experience. We believe this gives us a competitive advantage
and is critical to our long-term success."
Second Quarter Financial Results
Net sales for the thirteen weeks ended August 2, 2008 increased 5% to
$845.8 million from $804.5 million for the thirteen weeks ended August 4,
2007. Total Company direct-to-consumer net sales increased 23% to $55.9
million for the thirteen week period ended August 2, 2008, compared to the
thirteen week period ended August 4, 2007. Total Company comparable store
sales decreased 4% for the thirteen weeks ended August 2, 2008.
The gross profit rate for the quarter was 70.1%, up 130 basis points
compared to last year. The improvement in gross profit rate was primarily due
to a higher initial markup rate. The markdown rate was flat compared to last
year.
Stores and distribution expense, as a percentage of sales, increased 100
basis points to 42.6% from 41.6% and marketing, general and administrative
expense, as a percentage of sales, increased 70 basis points to 12.9% from
12.2%. The Company continued to operate a disciplined cost structure.
Reductions in store payroll hours more than offset the minimum wage increase
and resulted in a decrease in store payroll expense, as a percent of sales,
compared to last year. The increase in operating expense rate, compared to
last year, primarily resulted from the inability to leverage fixed expenses
due to the comparable store sales decline and additional expense needed to
execute the Company's international expansion plans. The rate increase also
reflects additional expense incurred related to charges associated with the
departure of a senior executive.
Operating income for the second quarter was $124.0 million compared to
$124.1 million last year.
Interest income for the second quarter decreased to $1.8 million compared
to $4.1 million last year. The decrease was attributed to a lower average
rate of return on investments, compared to last year, primarily due to a
restructuring of the investment portfolio.
The effective tax rate for the second quarter was 38.1% compared to 36.6%
last year. The rate unfavorability was primarily attributed to lower tax
exempt investment income. The effective tax rate for the second quarter of
fiscal 2007 reflected the favorable impact from the settlement of tax audits.
Net income for the second quarter decreased 4% to $77.8 million compared
to $81.3 million last year.
Net income per diluted share for the second quarter decreased 1% to $0.87,
including $0.01 related to charges associated with the departure of a senior
executive, compared to $0.88 last year.
2008 Outlook
The Company expects net income per diluted share for the second half of
fiscal 2008 to be in the range of $3.40 to $3.45. Based upon this guidance,
the Company now expects full year fiscal 2008 net income per diluted share to
be in the range of $4.95 to $5.00. The low end of the guidance reflects a
negative 7% comparable store sales scenario, which is consistent with the
trend in July, approximately $10 million in incremental expense from minimum
wage rate and manager salary increases, and approximately $11.5 million in
preopening rent expense for future flagship stores.
The Company plans total capital expenditures for Fiscal 2008 to be between
$405 million and $410 million with approximately $285 million of this amount
allocated to new store construction and store remodels. Approximately $50
million is allocated to "refresh" improvements and other brand enhancing
investments planned for existing stores and the balance is allocated to home
office, information technology, and direct-to-consumer infrastructure
investments.
For Fiscal 2008, the Company now expects to increase gross square-footage
by approximately 9 - 10%, which reflects a shift in opening dates for six
stores from 2008 to 2009 due to a change in possession dates for construction.
In North America, the Company now expects to open 99 new non-flagship stores
including two new Abercrombie & Fitch stores, 66 new Hollister Co. stores, 12
new abercrombie stores, six new RUEHL stores, 11 new Gilly Hicks stores and
two new outlet stores. The Company also plans to open three new, non-flagship
Hollister Co. stores in the United Kingdom in Fiscal 2008.
Other Developments
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 16, 2008 to shareholders of record at the close of business on
August 29, 2008.
The Company plans to open an Abercrombie & Fitch and abercrombie flagship
in Milan in late 2009. This adds to the 2009 flagship opening schedule, which
currently includes a Hollister and abercrombie flagship in New York and an
Abercrombie & Fitch flagship in Copenhagen, Denmark and Tokyo, Japan. The
company continues to pursue lease arrangements for store locations in Europe
and Asia.
The Company operated 353 Abercrombie & Fitch stores, 209 abercrombie
stores, 479 Hollister Co. stores, 25 RUEHL stores and eight Gilly Hicks stores
in the United States at the end of the second quarter. The Company also
operated three Abercrombie & Fitch stores and three Hollister Co. stores in
Canada, and one Abercrombie & Fitch store in London, England. The Company
operates e-commerce websites at www.abercrombie.com, www.abercrombiekids.com,
www.hollisterco.com and www.RUEHL.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 (800) 811-0667 or internationally at (913) 981-4901. To
listen via the internet, go to www.abercrombie.com, select the Investors 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 7331496; or for 12 months
by visiting the Company's website at 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 February 2, 2008, in some cases have affected
and in the future could affect the Company's financial performance and could
cause actual results for the 2008 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; 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 August 2, 2008 and Thirteen Weeks Ended August 4,
2007
(in thousands, except per share data)
ACTUAL ACTUAL
% of % of
2008 Sales 2007 Sales
Net Sales $845,799 100.0% $804,538 100.0%
Cost of Goods Sold 252,830 29.9% 251,100 31.2%
Gross Profit 592,969 70.1% 553,438 68.8%
Total Stores and Distribution Expense 360,719 42.6% 334,417 41.6%
Total Marketing, General and
Administrative Expense 109,024 12.9% 98,440 12.2%
Other Operating Income, Net (754) -0.1% (3,551) -0.4%
Operating Income 123,980 14.7% 124,132 15.4%
Interest Income, Net (1,757) -0.2% (4,143) -0.5%
Income Before Income Taxes 125,737 14.9% 128,275 15.9%
Income Tax Expense 47,905 5.7% 47,000 5.8%
Effective Rate 38.1% 36.6%
Net Income $77,832 9.2% $81,275 10.1%
Net Income Per Share:
Basic $0.90 $0.92
Diluted $0.87 $0.88
Weighted-Average Shares Outstanding:
Basic 86,842 88,090
Diluted 89,963 92,294
Abercrombie & Fitch Co.
Condensed Consolidated Statements of Income
(Unaudited)
Twenty-Six Weeks Ended August 2, 2008 and Twenty-Six Weeks Ended August 4,
2007
(in thousands, except per share data)
ACTUAL ACTUAL
% of % of
2008 Sales 2007 Sales
Net Sales $1,645,977 100.0% $1,546,948 100.0%
Cost of Goods Sold 518,842 31.5% 506,241 32.7%
Gross Profit 1,127,135 68.5% 1,040,707 67.3%
Total Stores and Distribution
Expense 702,507 42.7% 642,655 41.5%
Total Marketing, General and
Administrative Expense 213,722 13.0% 188,615 12.2%
Other Operating Income, Net (3,695) -0.2% (7,405) -0.5%
Operating Income 214,601 13.0% 216,842 14.0%
Interest Income, Net (9,403) -0.6% (7,854) -0.5%
Income Before Income Taxes 224,004 13.6% 224,696 14.5%
Income Tax Expense 84,056 5.1% 83,340 5.4%
Effective Rate 37.5% 37.1%
Net Income $139,948 8.5% $141,356 9.1%
Net Income Per Share:
Basic $1.62 $1.61
Diluted $1.55 $1.53
Weighted-Average Shares
Outstanding:
Basic 86,588 87,987
Diluted 90,051 92,369
Abercrombie & Fitch Co.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
ASSETS August 2, 2008 February 2, 2008
Current Assets
Cash and Equivalents $301,042 $118,044
Marketable Securities - 530,486
Receivables 83,197 53,801
Inventories 470,682 333,153
Deferred Income Taxes 39,863 36,128
Other Current Assets 76,293 68,643
Total Current Assets 971,077 1,140,255
Property and Equipment, Net 1,398,092 1,318,291
Marketable Securities 271,417 -
Other Assets 122,632 109,052
TOTAL ASSETS $2,763,218 $2,567,598
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Outstanding
Checks $197,682 $151,798
Accrued Expenses 232,606 280,910
Debt 100,000 -
Deferred Lease Credits 42,794 37,925
Income Taxes Payable - 72,480
Total Current Liabilities 573,082 543,113
Long-Term Liabilities
Deferred Income Taxes 26,866 22,491
Deferred Lease Credits 226,715 213,739
Other Liabilities 190,910 169,942
Total Long-Term Liabilities 444,491 406,172
Total Shareholders' Equity 1,745,645 1,618,313
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $2,763,218 $2,567,598
SOURCE Abercrombie & Fitch Co.
