This is a summary of the fourth quarter fiscal 2008 earnings call conducted by Abercrombie & Fitch Co. (ANF) on February 13, 2009.
Management:
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Chief Financial Officer: Jonathan Ramsden
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Chairman and Chief Executive Officer: Mike Jeffries
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Principal Accounting Officer: Brian Logan
Key Investor Issues:
- Abercrombie earned $68.4 million, or 78 cents per share, down from $216.8 million, or $2.40 per share, a year earlier.
- Fourth-quarter profit plunged 68% as sales declined 19% to $998 million from $1.29 billion a year ago.
- Same-store sales fell 25% on declines at all three of the company''s divisions.
- The company plans to open 10 stores across Abercrombie brands in 2009 in the U.S. and at least 2 Hollister stores internationally, with 10 other Hollister stores to open in Europe in 2009.
Fourth Quarter Highlights:
Net sales for the quarter decreased to $998 million, the total comparable stores decline of 25% was slightly better than anticipated driven by the combination of stronger post Christmas business, a trend that has increased in recent years and season ending clearance mark downs. The gross profit rate in the fourth quarter was 64.4% down 280 basis points from last year as a result of higher mark down rate.
Abercrombie implemented cost reductions during the quarter which resulted in total operating expenses excluding the asset impairment charge in line with 2007.
Excluding the asset impairment and tax charges net income per diluted share was $1.10 and somewhat above the high end of the range provided in November.
Store growth for the year 2009 will be focused on international opportunities.
Based on current firm lease commitments Abercrombie expects total capital expenditures to be in the range of $165 to $175 million including $45 to $50 million for IT, distribution center and home office projects, and $120 to $125 million related to new stores, store refreshes and remodels.
Domestically, in addition to the Hollister flagship in SoHo Abercrombie has firm commitments to open nine stores in 2009.
These commitments include two Abercrombie stores, four Hollister stores, two Gilly Hicks stores, one outlet store. Internationally Abercrombie has existing firm commitments to open two mall based UK Hollister stores in addition to the three already opened and one Canadian Abercrombie store.
Due to the success of introducing Hollister in the UK Abercrombie is in active discussions with regard to additional store openings in Europe.
The current best estimate is that Abercrombie will open approximately 10 additional stores by the end of 2009. The company remains on track to open Abercrombie & Fitch and Abercrombie flagships in Milan in November and an Abercrombie & Fitch flagship in Tokyo in December. At this point Abercrombie expects that the A&F flagship in Copenhagen and the Abercrombie flagship in New York will not open until 2010.
Abercrombie has implemented a significant number of cost reduction initiatives in both stores and the home office.
With regard to MG&A specifically Abercrombie is confident that these initiatives will result in expenses below 2008 levels. These expense reduction efforts will be ongoing and will be responsive to the overall sales trend of the business.
Fiscal 2008 fourth quarter net sales for the 13 weeks ended Jan. 31, 2009, decreased 19% to $998 million from $1.23 billion for the 13 weeks ended Feb. 2, 2008.
- Fourth quarter direct to consumer net sales decreased 12% to $95.1 million.
- Total company comparable store sales decreased 25%, average transaction value per store decreased 25% and average transaction value decreased 1% compared to last year.
One contributing factor in the decline in comparable store sales during the quarter was a lessening benefit from the Fifth Avenue flagship and US based tourist stores. From a merchandise classification standpoint for the total company the masculine categories continue to outpace the feminine categories as male comparable store sales decreased by a low teen while female comparable store sales decreased by a low 30.
On the male side denim, knit tops and fragrance were strongest while graphic tees and fleece were weakest. On the female side knit tops, fleece and graphic tees were the primary drivers of the female comparable store sales result.
