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Details on Industry Insight.
New Albany, Ohio, November 16, 2010: Abercrombie & Fitch Co. (NYSE: ANF) today reported unaudited results which reflected net income of $50.0 million and net income per diluted share of $0.56 for the thirteen weeks ended October 30, 2010, compared to a net income of $38.8 million and net income per diluted share of $0.44 for the thirteen weeks ended October 31, 2009.
Net income for the thirteen weeks ended October 31, 2009 included a benefit of $0.21 per basic and diluted share associated with the true up of the year-to-date tax rate and a net loss per basic and diluted share of $0.12 from discontinued operations.
Third Quarter Sales Highlights
Total Company net sales, including direct-to-consumer net sales, increased 18% to $885.8 million
Total Company domestic net sales, including direct-to-consumer net sales, increased 8% to $721.7 million
Total Company international net sales, including direct-to-consumer net sales, increased 87% to $164.1 million
Comparable store sales increased 7%
Total Company direct-to-consumer net merchandise sales increased 32% to $81.4 million
Abercrombie & Fitch net sales of $384.0 million;
Abercrombie & Fitch comparable store sales increased 8%
abercrombie kids net sales of $99.9 million; abercrombie kids comparable store sales increased 2%
Hollister Co. net sales of $392.5 million; Hollister Co. comparable store sales increased 7%
Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said:
"We are pleased with our performance against our objectives for the quarter, and remain very excited about the opportunities ahead of us across all areas of our business. Our domestic business has continued to improve, our international results are outstanding, and our direct to consumer business is posting very strong growth."
Third Quarter Financial Results
Net sales for the thirteen weeks ended October 30, 2010 increased 18% to $885.8 million from $753.7 million for the thirteen weeks ended October 31, 2009. Total Company direct-to-consumer net merchandise sales increased 32% to $81.4 million for the thirteen week period ended October 30, 2010. Total Company third quarter comparable store sales increased 7%.
The gross profit rate for the third quarter was 63.7%, 40 basis points lower than last year's third quarter gross profit rate. The decrease in gross profit rate was primarily driven by an 11% decrease in average unit retail, partially off-set by a reduction in average unit cost.
Stores and distribution expense, as a percentage of net sales, decreased to 43.5% from 46.4% for the third quarter. The decrease in the stores and distribution expense rate was primarily driven by lower store occupancy costs and payroll costs as a percentage of net sales.
Marketing, general and administrative expense for the third quarter was $102.6 million, a 17% increase compared to $87.9 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, and the favorable impact of an insurance recovery in the prior year.
The effective tax rate for continuing operations for the thirteen weeks ended October 30, 2010 was an expense of 35.6% as compared to a benefit of 4.7% for the prior year comparable period. The third quarter 2009 rate was favorably impacted by a true up in the year-to-date tax rate, along with a benefit of $2.2 million from the settlement of state tax audits.
The Company ended the third quarter of Fiscal 2010 with $618.2 million in cash and cash equivalents, borrowings under the credit agreement of $57.2 million and outstanding letters of credit of $10.6 million compared to $466.9 million in cash and cash equivalents, borrowings under the credit agreement of $50.6 million and outstanding letters of credit of $45.3 million at the comparable point last year.
The Company continues to expect to open approximately 20 international mall-based Hollister stores in Fiscal 2010, 11 of which will be opened in the fourth quarter. Since the beginning of the fourth quarter, the Company has opened Abercrombie & Fitch flagships in Fukuoka, Japan and Copenhagen, Denmark and will also open its first international Gilly Hicks store in the United Kingdom during the quarter.
The Company also expects to open its first Abercrombie & Fitch store in Puerto Rico, a Hollister Epic store on 5th Avenue in New York and one domestic Gilly Hicks store during the fourth quarter.
The Company now expects total capital expenditures to be approximately $190 million, including approximately $140 million related to new stores, store refreshes and remodels, and approximately $50 million related to information technology, distribution center and other home office projects.
A summary of store openings and closings for the thirteen and thirty-nine week periods ended October 30, 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 December 14, 2010 to shareholders of record at the close of business on November 26, 2010.
An investor presentation of third 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 October 2010, the Company operated a total of 1,106 stores. The Company operated 340 Abercrombie & Fitch stores, 201 abercrombie kids stores, 510 Hollister Co. stores and 17 Gilly Hicks stores domestically. The Company also operated seven Abercrombie & Fitch stores, four abercrombie kids stores and 27 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 (800) 289-0468 or internationally at (913) 312-93211. 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 4069400; or for 12 months by visiting the Company's website at www.abercrombie.com.