New Albany, Ohio,
August 26, 2015: Abercrombie & Fitch Co. (NYSE:
ANF) today reported second quarter financial results that reflected
a GAAP net loss of $0.8 million and net loss per diluted share of
$0.01 for the thirteen weeks ended August 1, 2015, compared to GAAP
net income of $12.9 million and net income per diluted share of
$0.17 for the thirteen weeks ended August 2, 2014.
Excluding certain items, the
Company reported an adjusted non-GAAP net income of $8.6 million
and net income per diluted share of $0.12 for the second quarter,
compared to adjusted non-GAAP net income of $14.1 million and net
income per diluted share of $0.19 for the second quarter last
year. The year-over-year reduction in adjusted non-GAAP net
income per diluted share included an adverse impact from changes in
foreign currency exchange rates of approximately $0.18.
On a sequential basis, comparable
sales trends improved broadly from last quarter. In addition,
adjusted non-GAAP operating and net income were above last year on
a constant currency basis.
A reconciliation of GAAP financial
measures to non-GAAP financial measures is included in a schedule
accompanying the consolidated financial statements with this
release.
Arthur Martinez, Executive
Chairman, said:
"In our second quarter, we
delivered a meaningful sequential improvement in comparable sales,
stabilized gross margins and achieved significant expense
reductions. Our results exceeded what we signaled in our
first quarter earnings call and give us confidence that we are on
the right track, although we recognize that we still have much to
achieve.
We continue to take steps to
revitalize our performance, maintaining an intense focus on
improving the customer experience. We made good progress in
Hollister and abercrombie kids, but more modest progress at
Abercrombie & Fitch. To accelerate our efforts, we have
reinvigorated Abercrombie & Fitch's brand design and
merchandising teams, recruiting a number of talented executives
with expertise relevant to our needs.
We understand the challenges
ahead. We are taking the steps necessary to deliver continued
improvement in our performance and to establish very clear brand
positions that will guide all elements of our business and provide
the foundation for long-term profitability and growth."
Second Quarter Sales
Results
Net sales for the second quarter
decreased 8% to $817.8 million from the second quarter last year,
which included a comparable sales decline of 4% and an adverse
impact from changes in foreign currency exchange rates of
approximately 5%.
Sequential improvements in
comparable sales trends were driven largely by Hollister and
abercrombie kids and internationally. The Company achieved
positive comparable sales in Asia and Canada and broad-based
sequential improvement in Europe, including in the UK, Germany and
France.
Comparable Sales Summary - Brand (1) |
First Quarter |
|
Second Quarter |
|
Year-to-Date |
Abercrombie(2) |
(9)% |
|
(7)% |
|
(8)% |
Hollister |
(6)% |
|
(1)% |
|
(4)% |
Total Company |
(8)% |
|
(4)% |
|
(6)% |
Comparable Sales Summary - Geography (1) |
First Quarter |
|
Second Quarter |
|
Year-to-Date |
United States |
(7)% |
|
(4)% |
|
(6)% |
International |
(9)% |
|
(4)% |
|
(6)% |
Total Company |
(8)% |
|
(4)% |
|
(6)% |
(1) Comparable
sales are calculated on a constant currency basis and exclude Gilly
Hicks.
(2) Abercrombie
includes the Abercrombie & Fitch and abercrombie kids
brands.
Net sales for the second quarter
decreased 9% to $380.6 million for Abercrombie and 6% to $437.1
million for Hollister. Comparable sales for the second
quarter decreased 7% in Abercrombie and 1% in Hollister.
Net sales for the second quarter
decreased 6% to $514.5 million in the U.S. and 12% to $303.2
million internationally. Comparable sales for the second
quarter decreased 4% in the U.S. and 4% internationally.
Net sales from direct-to-consumer
and omnichannel grew to approximately 21% of the total Company net
sales in the second quarter, compared to approximately 19% of total
Company net sales last year.
Additional Second
Quarter Results Commentary
The gross profit rate for the
second quarter was 62.3%, 20 basis points higher than last
year. Excluding certain items, the adjusted gross profit rate
for the second quarter was 62.0%, reflecting a 110 basis point
improvement over last year on a constant currency basis, primarily
driven by lower average unit cost. Adjusted gross profit for
the quarter excluded a benefit of $2.6 million related to higher
than expected recoveries on the inventory write-down associated
with the Company's first quarter decision to accelerate the
disposition of certain aged inventory.
Stores and distribution expense
for the second quarter was $389.2 million, down from $426.3 million
last year. Excluding certain items, adjusted stores and
distribution expense decreased $37.3 million, as a result of
benefits from changes in foreign currency exchange rates, as well
as expense reduction efforts and the realization of expense savings
on lower sales. Adjusted stores and distribution expense for
the quarter excluded $1.4 million of charges primarily related to
accelerated depreciation and disposal costs associated with the
first quarter decision to discontinue the use of certain store
fixtures, partially offset by favorable terms associated with store
closures, compared to $1.2 million of excluded charges last year
related to the Company's profit improvement initiative.
Marketing, general and
administrative expense for the second quarter was $119.8 million,
up from $111.0 million last year. Excluding certain items,
adjusted marketing, general and administrative expense for the
second quarter decreased $6.2 million, primarily due to expense
reduction efforts during the quarter. Adjusted marketing,
general and administrative expense for the quarter excluded $15.8
million in legal settlement charges related to various lawsuits,
compared to $0.7 million of excluded charges related to the
Company's profit improvement initiative last year.
The Company recognized
restructuring charges of $0.4 million last year, associated with
the closure of the Gilly Hicks stand-alone stores, which were
excluded from adjusted results.
Net other operating income was
$1.1 million for the second quarter, compared to $4.3 million last
year which had included insurance recoveries of $2.9 million.
The effective tax rate remains
highly sensitive to the earnings mix by jurisdiction, particularly
at lower levels of profitability.
The Company ended the quarter with $408.3 million in cash and cash
equivalents, and gross borrowings under the Company's term loan
agreement of $297.8 million, compared to $310.7 million in cash and
cash equivalents and $188.0 million in borrowings last year.
The Company ended the quarter with
$478.6 million in inventory, a decrease of 13.0% versus last
year.
During the quarter, the Company
opened two international Hollister chain stores, one international
Abercrombie & Fitch chain store and one U.S. Abercrombie &
Fitch chain store. A summary of store openings and closings
for the second quarter is included with the financial statement
schedules following this release.
Other
Developments
As previously announced, on August
20, 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 September 9, 2015 to stockholders of record
at the close of business on September 1, 2015.
Outlook
With regard to the second-half of
its fiscal year 2015, the Company expects:
-
Further comparable sales trend improvement,
skewed towards the fourth quarter.
-
Continued headwinds from foreign currency
exchange rates based on current exchange rates.
-
Gross margin rate to be approximately flat
compared to last year, but up on a constant currency
basis.
-
Operating expense to be approximately flat
compared to last year after absorbing the restoration of incentive
compensation provisions, the effects of which will skew toward the
third quarter, excluding the effects relating to changes in
comparable sales.
-
A weighted average diluted share count of
approximately 70 million shares, excluding effects of potential
share buybacks.
In addition, the Company expects
an elevated tax rate on a full year basis, which remains highly
sensitive to earnings mix by jurisdiction. Over time, the
sustainable tax rate is expected to return to the mid-to-upper
30's.
The Company also expects capital
expenditures of approximately $150 million for the full-year.
These expenditures will focus on the opening of new stores and
store updates, as well as direct-to-consumer and IT investments to
support growth initiatives.
The Company plans to open 15
full-price stores in fiscal 2015 in the key growth markets of
China, Japan and the Middle East, six full price stores in North
America and ten 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
outlook for the remainder of fiscal year 2015 are potential charges
related to impairments and store closings and other potential
charges related to its restructuring efforts.
An investor presentation of second 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
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 second quarter, the
Company operated 783 stores in the United States and 171 stores
across Canada, Europe, Asia 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 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) 551-9018
and ask for the Abercrombie & Fitch Quarterly Call or go to
www.abercrombie.com. The international call-in number is
(719) 325-2367. 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 2382999
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, including our restructuring efforts, 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 and regulatory compliance 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
and compliance with 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.
Q2 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
HUG#1947536
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