Abercrombie & Fitch Co.’s (ANF) adjusted
earnings of $1.12 per share for the fourth quarter hit the bull’s
eye, coming in line with the Zacks Consensus Estimate. However,
quarterly earnings for the quarter were down 18.8% from the
year-ago quarter earnings of $1.38 per share.
For full-year 2011, the company’s adjusted earnings came in at
$2.31 per share, missing the Zacks Consensus Estimate of $2.33 per
share, but sweeping past the year-ago period earnings of $2.05 per
share.
Revenue
Abercrombie reported double-digit net sales growth of 16% in the
reported quarter, reaching $1,328.8 million from $1,149.4 million
in the prior-year quarter. Moreover, Abercrombie’s quarterly
revenue meets the Zacks Consensus Estimate of $1,329.0 million.
Abercrombie’s fourth quarter revenue increase reflected a 4%
rise in domestic net sales (including direct-to-consumer sales) and
a robust 62% surge in international net sales (including
direct-to-consumer sales).
Overall direct-to-consumer merchandise sales jumped 41% to
$212.3 million in the reported quarter, reflecting continuing
strength. During the quarter, the company reported flat comparable
store sales (comps) versus the comparable quarter of last year,
which incorporated a 2% comps increase at the Hollister Co. brand,
offset by 4% comps decline at Abercrombie & Fitch and a 3%
comps decline at abercrombie kids.
Full year revenue at Abercrombie was $4,158.1 million, up 20%
year over year, marginally missing the Zacks Consensus Estimate of
$4,159 million. The year-over-year increase was characterized by a
10% increase in domestic sales (including direct-to-consumer sales)
and a whopping 63% spike in international sales (including
direct-to-consumer sales). The company’s net direct-to-customer
sales for the year witnessed an increase of 36% to $552.6
million.
Comparable store sales for the year registered a 5% increase
compared with last year. This, by brand, reflected a 3% comps
increase at Abercrombie & Fitch, a 4% surge at abercrombie kids
and an 8% rise at Hollister Co.
Fourth Quarter Results Summary
In the fourth quarter, gross profit inched up 2% to $745.6
million while gross margin contracted 750 basis points to 56.1%.
The contraction in gross margin was due to an increase in the
average unit cost as well as lower-than-expected sales and higher
markdowns due to an aggressive promotional environment.
Stores and distribution expenses, as a percentage of sales,
declined to 45.3% from 42.2% in the prior-year period. Moreover,
marketing, general and administrative expenses, as a percentage of
sales, also declined to 8.4% compared with 9.3% in the prior-year
period.
Operating income for the quarter declined substantially to $24.3
million from $144.7 million in the same quarter last year. This
resulted in operating margins dipping to 1.8% from 12.6% in the
prior-year period.
Balance Sheet
Abercrombie ended fiscal 2011 with cash and cash equivalents of
$583.5 million and shareholders’ equity of $1,862.5 million.
Long-term debt for the year came in at $57.8 million. During fiscal
2011, the company spent $316.6 million in capital expenditures,
consisting of $256 million for new stores, store refreshes and
remodels, and $60 million for information technology, distribution
center and other home office projects.
During the fourth quarter, Abercrombie bought back 2.017 million
of its shares at a total cost of $97.9 million. This brought the
company’s full year share buy backs to about 3.5 million for an
aggregate cost of $196.6 million. As of January 28, 2012, the
company had nearly 6.2 million shares left under its publicly
announced stock repurchase authorizations.
Store Update
During fiscal 2011, the company opened 47 new international
stores while it closed 71 stores in the U.S. The company
ended fiscal 2011 operating a total of 1,045 stores, including 294
Abercrombie & Fitch stores, 159 abercrombie kids stores, 571
Hollister Co. stores and 21 Gilly Hicks stores.
Sneak Peek into 2011
Going forward, Abercrombie expects earnings per share for fiscal
2012 to come in the range of $3.50 to $3.75. The company expects to
incur capital expenditure of nearly $400 million in fiscal 2012,
primarily slated for new stores and investments in the distribution
center and direct-to-consumer operations.
In 2012, the company plans to open five Abercrombie & Fitch
stores in flagship locations including Hamburg, Hong Kong, Munich,
Dublin and Amsterdam as well as an abercrombie kids store in
London. Additionally, the company plans to add new
abercrombie kids store in its Munich and Amsterdam locations.
Planned store closures for fiscal 2012 include 40 international
Hollister stores.
In Conclusion
Abercrombie operates in a highly fragmented market and competes
with national as well as regional players. Besides competing with
larger retailer like Gap Inc. (GPS), the company
also competes with value-priced specialty retailer such as
Aeropostale Inc. (ARO).
Abercrombie currently retains a short-term Zacks #3 Rank (Hold).
Though cognizant of the rising retail market, we are also conscious
of steep competition in this space and rising commodity prices.
Therefore, we maintain a long-term Neutral recommendation on the
stock.
ABERCROMBIE (ANF): Free Stock Analysis Report
AEROPOSTALE INC (ARO): Free Stock Analysis Report
GAP INC (GPS): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Abercrombie and Fitch (NYSE:ANF)
Historical Stock Chart
From Aug 2024 to Sep 2024
Abercrombie and Fitch (NYSE:ANF)
Historical Stock Chart
From Sep 2023 to Sep 2024