For the fiscal year ended January 31, 2009, net sales decreased 6% to $3.54 billion from $3.75 billion for the fiscal year ended February 2, 2008.
- For the year, comparable store sales decreased 13%, transactions per stores decreased 15% and average transaction value increased 2%.
- Fiscal 2008 direct to consumer net sales increased 5% to $271 million.
- The fourth quarter gross profit rate was 64.4% down 280 basis points compared to last year.
- An increase in initial mark up rate was more than offset by an increased in the mark down rate versus last year.
The company anticipated a higher mark down rate would be required in order to clear through seasonal merchandise as a result of the declining sales trend and the company’s limited ability to further reduce sportswear deliveries.
For the year, the gross profit rate was 66.7% down 30 basis points compared to fiscal 2007. The decrease reflects the higher mark down rate in the fourth quarter.
Abercrombie ended the fourth quarter with inventory per gross square foot at cost up 2% as compared to the previous year which was slightly better than the guidance given during the third quarter call. The increase in inventory at the end of the fourth quarter was the result of an increase in basic categories such as denim and polo’s, while seasonal fashion categories were down. A top priority in the first quarter of 2009 will be to reduce inventory levels to be in line with the sales declines.
Stores and distribution expense for the quarter as a percentage of sales decreased 10.7 percentage points to 42.3% versus 31.6% last year.
Although Abercrombie introduced a number of initiatives to reduce store payroll hours in response to the declining sales the increase in rate versus last year is primarily attributed to the limitation on leverage and fixed expenses due to the comparable store sales decline.
This year, stores and distribution expense also included a non-cash impairment charge of $30.6 million as it was determined that the carrying amount of assets related to 11 Abercrombie & Fitch, six Abercrombie, three Hollister, and nine RUEHL stores exceeded the fair value of those assets. The majority of the $30.6 million impairment charge is associated with the nine RUEHL stores.
For the year, stores and distribution expense as a percentage of sales increased 5.7 percentage points to 42.7% versus 37% last year. The increase in rate primarily reflects this years -13% comparable stores sales result.
For the fourth quarter, marketing, general and administrative expense was $101 million, down 2% versus last year’s expense of $103.1 million.
The reduction in expense includes savings in incentive compensation and benefits, travel, and outside services. As a percentage of sales MG&A increased 1.7 percentage points to 10.1% from 8.4% last year.
For the year, marketing, general and administrative expense was $419.7 million up 6% versus last year’s expense of $395.8 million. The increase in expense reflects investments in home office resources for flagship and international expansion, partially offset by fourth quarter savings.
The effective tax rate for the fourth quarter was 45.7% compared to 36.9% for the fourth quarter of 2007.
This year’s tax rate reflects $9.9 million in expense associated with the execution of the Chairman and Chief Executive Officer’s new employment agreement which pursuant to section 162M results in the exclusion of previously recognized tax benefits.
Under the previous employment agreement, the company recorded deferred tax assets based on the anticipated delivery of benefits to the CEO in the calendar year following the year after his retirement. As a result of the new employment agreement, the CEO receives the benefits during his employment therefore the expected tax benefits will no longer be available. The effective tax rate for fiscal 2008 was 39.6% compared to 37.4% for fiscal 2007.
Net income for the fourth quarter was $68.4 million versus $216.8 million last year.
- Fourth quarter net income per diluted share was $0.78 including charges of $0.32 versus net income per diluted share of $2.40 last year.
- Net income for fiscal 2008 was $272.3 million versus $475.7 million last year.
- Fiscal 2008 net income per diluted share was $3.05 versus $5.20 last year.
For fiscal 2008 store square footage grew by approximately 9% due to the addition of 90 new domestic stores and seven new international stores, consisting of two Abercrombie & Fitch, 12 Abercrombie, 66 Hollister, six RUEHL and 11 Gilly Hicks stores including two Abercrombie and two Hollister stores in Canada and three Hollister stores in the United Kingdom.
Abercrombie ended fiscal 2008 with a total of 356 Abercrombie & Fitch, 212 Abercrombie, 515 Hollister, 28 RUEHL and 14 Gilly Hicks stores including three Abercrombie & Fitch, two Abercrombie, and five Hollister stores in Canada and one Abercrombie & Fitch and three Hollister stores in the United Kingdom.
Fiscal 2008 capital expenditures were approximately $370 million which was lower than previously guided.
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