Abercrombie & Fitch Co. (
ANF)
Q2 2010 Earnings Call Transcript
August17, 2010 8:30 a.m. ET
Executives
Eric Cerny - Manager, IR
Mike Jeffries - Chairman and CEO
Jonathan Ramsden - EVP and CFO
Analysts
Jeff Klinefelter - Piper Jaffray
Janet Kloppenburg - JJK Research
Edward Yruma - KeyBanc
Brian Tunick - JPMorgan
Christine Chen - Needham & Company
Stacy Pak - SP Research
Evren Kopelman - Wells Fargo Securities
Michelle Tan - Goldman Sachs
Richard Jaffe - Stifel
Lorraine Hutchinson - Bank of America-Merrill Lynch
Robert Samuels - Phoenix Partners
Dorothy Lakner - Caris & Company
John Morris - BMO Capital
Jennifer Black - Jennifer Black & Associates
Robin Murchison - SunTrust
Marni Shapiro - The Retail Tracker
Laura Champine - Cowen and Company
Roxanne Meyer - UBS
Dana Telsey - Telsey Advisory Group
Amy Noblin - Weeden
Howard Tubin - RBC Capital Markets
Sam Panella - Raymond James
Linda Tsai - MKM Partners
Operator
Ladies and Gentlemen, please standby. We are about to begin. Good day, everyone, and welcome to the Abercrombie & Fitch second quarter earnings results conference call. Today’s conference is being recorded. If you have a question at any time during today’s conference you can call us by pressing star, one on your touchtone telephone. We will open the call to take your questions at the end of the presentation. We ask you to limit your self to one question during the Question-and-Answer session. At this time, I would like to turn the conference over to Mr. Eric Cerny. Mr. Cerny, please go ahead, sir.
Eric Cerny
Good morning and welcome to our second quarter earnings call. Earlier this morning, we released our second quarter sales and earnings, balance sheet, income statement, store opening and closing summary, and an updated financial history. Please feel free to reference these materials available on our website. Also available on our website is an investor presentation which we will be referring to in our comments during this call.
This call is being recorded and the replay may be accessed through the internet at abercrombie.com under the Investors section. Before we begin, I will remind you that any forward-looking statements we may make today are subject to the Safe Harbor statement found in our SEC filings.
Today’s earnings call will be limited to one hour. We will begin the call with a few brief remarks from Mike, followed by a review of the financial performance for the quarter from Jonathan Ramsden. After our prepared comments, we will be available to take your questions for as long as time permits. Please limit yourself to one question, so that we can speak with as many callers as possible.
As a reminder, the after-tax operating results of Ruehl for 2009 and prior periods are now included in discontinued operations and income statement and related comparisons to prior year therefore generally exclude Ruehl.
Now I will turn the call over to Mike.
Mike Jeffries
Good morning, everyone. Thank you for joining us. We are pleased with the progress we are making as we pursue our strategy of leveraging the international appeal of our iconic brands to build a highly profitable, sustainable, global business. We achieved growth both domestically and internationally during the quarter. We are gaining traction and we are very excited about what we see ahead of us.
In that context, I want to take a few minutes to recap how we see the state of our business today and to talk about our progress on some of the key initiatives we have discussed in recent calls.
Starting with our domestic business, we are pleased that all of the brands achieved positive comps for the quarter. We are particularly pleased with the performance of the flagship and tourist stores both on an absolute and a relative basis. Year-to-date, our U.S. tourist stores produced double-digit comps. And as you know, we operate these locations without many of the sale events and promotions that we have run in the rest of the chain.
At the same time, we are also pleased that our non-tourist stores for all brands were in positive territory for the quarter. I want to make special mention of our Hollister Epic store in SoHo, which has posted very strong comps since it entered the comp base a few weeks ago.
Next, we believe that our marketing and promotional activities for the quarter were effective and appropriately timed. We also believe that the promotions were effective in driving overall gross profit dollars. Substantially all of the promotions we ran during the quarter were planned in advance and were driven by our expectation that they would be effective in driving sales productivity and gross profit dollars. As we said at the beginning of the year, we are willing to tolerate some gross margin rate erosion in the near term to accomplish that.
While it is too early to speak to back-to-school results, I can also tell you that I feel very good about the look and feel of our stores today. We have great product in both men’s and women’s. We are gaining traction with trends. And importantly, we have inventory behind these trends.
