ROTH investor conference is Sunday - Wednesday. Implications of a new tax on some high net-wealth individuals from Moss Adams Capital. "The Legacy of Bing," next up at SHACC. Details on Industry Insight.
- Stock falls after reporting earnings
Source: Abercrombie & Fitch Co. On Tuesday August 17, 2010, 7:00 am EDT
NEW ALBANY, Ohio, Aug. 17 /PRNewswire-FirstCall/ -- Abercrombie & Fitch Co. (NYSE:ANF - News) today reported unaudited results which reflected net income of $19.5 million and net income per diluted share of $0.22 for the thirteen weeks ended July 31, 2010, compared to a net loss of $26.7 million and a net loss per basic and diluted share of $0.30 for the thirteen weeks ended August 1, 2009. Net income for the thirteen weeks ended July 31, 2010 included a non-cash asset impairment charge associated with expected store closures of $0.02 per diluted share. Net loss for the thirteen weeks ended August 1, 2009 included a net loss per basic and diluted share of $0.21 from discontinued operations.
Second Quarter Sales Highlights
Total Company net sales, including direct-to-consumer net sales, increased 17% to $745.8 million
Total Company domestic net sales, including direct-to-consumer net sales, increased 8% to $612.6 million
Total Company international net sales, including direct-to-consumer net sales, increased 85% to $133.2 million
Comparable store sales increased 5%
Total Company direct-to-consumer net merchandise sales increased 50% to $69.0 million
Abercrombie & Fitch net sales of $335.6 million; Abercrombie & Fitch comparable store sales increased 8%
abercrombie kids net sales of $79.1 million; abercrombie kids comparable store sales increased 3%
Hollister Co. net sales of $322.2 million; Hollister Co. comparable store sales increased 2%
Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said:
"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 are very excited by what we see ahead of us."
Second Quarter Financial Results
Net sales for the thirteen weeks ended July 31, 2010 increased 17% to $745.8 million from $637.2 million for the thirteen weeks ended August 1, 2009. Total Company direct-to-consumer net merchandise sales increased 50% to $69.0 million for the thirteen week period ended July 31, 2010. Total Company second quarter comparable store sales increased 5%.
The gross profit rate for the second quarter was 65.1%, 150 basis points lower than last year's second quarter gross profit rate. The decrease in gross profit rate was primarily driven by a 15% decrease in average unit retail.
Stores and distribution expense, as a percentage of net sales, decreased to 48.9% from 52.1% for the second quarter. For the thirteen weeks ended July 31, 2010, stores and distribution expense included a non-cash pre-tax asset impairment charge associated with expected store closures of $2.2 million, or 0.3% of net sales. The decrease in the stores and distribution expense rate was primarily driven by lower store occupancy costs as a percentage of net sales.
Marketing, general and administrative expense for the second quarter was $95.2 million, a 10% increase compared to $86.7 million during the same period last year. The increase in marketing, general and administrative expense was primarily due to increases in compensation and benefits, including incentive and equity compensation, partially offset by a reduction in net legal and outside service expense.
The effective tax rate for continuing operations for the thirteen weeks ended July 31, 2010 was 27.2% as compared to 176.8% for the prior year comparable period. The second quarter 2010 rate was favorably impacted by provision-to-return adjustments for certain jurisdictions and the resolution of open tax matters. The second quarter 2009 rate was adversely impacted by a true up of the estimated annual effective tax rate as calculated in accordance with generally accepted accounting principles.
The Company ended the second quarter of Fiscal 2010 with $613.6 million in cash and cash equivalents, borrowings under the credit agreement of $53.2 million and outstanding letters of credit of $24.4 million compared to $366.5 million in cash and cash equivalents, borrowings under the credit agreement of $36.7 million and outstanding letters of credit of $42.9 million at the comparable point last year.
In Fiscal 2010, the Company continues to expect to open Abercrombie & Fitch flagship stores in Copenhagen, Denmark and Fukuoka, Japan and a Hollister Epic store on Fifth Avenue in New York.
The Company now expects to open approximately 20 international mall-based Hollister stores in Fiscal 2010, a reduction from the prior estimate of approximately 25 stores. The Company has confirmed plans to open one Abercrombie & Fitch store in Canada and its first international Gilly Hicks store in the United Kingdom in the fourth quarter of Fiscal 2010.
Domestically, the Company expects to open three Abercrombie & Fitch stores, including its first store in Puerto Rico, three abercrombie kids stores, three Hollister stores, two Gilly Hicks stores and five outlet stores.
The Company now expects total capital expenditures to be approximately $200 million, including approximately $160 million related to new stores, store refreshes and remodels, and approximately $40 million related to information technology, distribution center and other home office projects.
The Company expects to close approximately 60 domestic stores over the course of Fiscal 2010, predominantly at the end of the year. The majority of these closures will be by way of natural lease expirations. In addition, there are a number of stores where buy-outs or other closures prior to lease expiration are expected. Associated with these closures, the Company incurred a non-cash, pre-tax asset impairment charge of $2.2 million, included in stores and distribution expense, for the thirteen weeks ended July 31, 2010.
A summary of store openings and closings for the thirteen and twenty-six week periods ended July 31, 2010 is included with the financial statement schedules following this release.
The Board of Directors declared a quarterly cash dividend of $0.175 per share on the Class A Common Stock of Abercrombie & Fitch Co. payable on September 14, 2010 to shareholders of record at the close of business on August 27, 2010.
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 Time, today.
At the end of July Fiscal 2010, the Company operated a total of 1,098 stores. The Company operated 339 Abercrombie & Fitch stores, 202 abercrombie kids stores, 509 Hollister Co. stores and 17 Gilly Hicks stores domestically. The Company also operated six Abercrombie & Fitch stores, four abercrombie kids stores and 21 Hollister Co. stores internationally. The Company operates e-commerce websites at www.abercrombie.com, www.abercrombiekids.com, www.hollisterco.com and www.gillyhicks.com.
Today at 8:30 AM, Eastern 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 live conference call, dial (888) 211-4434 or internationally at (913) 312-0711. To listen via the Internet, go to www.abercrombie.com, select the Investors page and scroll through the Calendar of Events. Replays of the call will be available shortly after its completion. The audio replay can be accessed for two weeks following the reporting date by calling (888) 203-1112 or internationally at (719) 457-0820 followed by the conference ID number 4865283; or for 12 months by visiting the Company's website at www.abercrombie.com.