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- Company delivered decade-high first quarter net sales led by 14% growth from
Abercrombie brands - Gross profit rate up 570 basis points over Q1 2022, driving operating margin above expectations
- Inventory levels down 20% year-over-year from supply chain recovery and return of chase capability
- Company increases full year outlook ranges on sales and operating margin
Looking ahead, we remain cautiously optimistic on consumer demand and our ability to react to a dynamic macro environment, further supported by our strong balance sheet. We are managing inventory tightly and each brand is in a position to chase demand. Importantly, we are progressing on key, strategic investments across stores, digital and technology to deliver growth on both the top and bottom lines from 2022 levels consistent with our Always Forward Plan.”
Details related to reported net income (loss) per diluted share and adjusted net income per diluted share for the first quarter are as follows:
2023 | 2022 | |||||||
GAAP | $ | 0.32 | $ | (0.32 | ) | |||
Excluded items, net of tax effect (1) | (0.06 | ) | (0.05 | ) | ||||
Adjusted non-GAAP | $ | 0.39 | $ | (0.27 | ) | |||
Impact from changes in foreign currency exchange rates (2) | — | (0.12 | ) | |||||
Adjusted non-GAAP constant currency | $ | 0.39 | $ | (0.39 | ) |
(1) Excluded items consist of pre-tax store asset impairment charges.
(2) The estimated impact from foreign currency is calculated by applying current period exchange rates to prior year results using a 26% tax rate.
A summary of results for the first quarter ended
- Net sales of
$836 million , up 3% as compared to last year on a reported basis and up 4% on a constant currency basis. - Positive total company comparable sales of 3%.
- Gross profit rate of 61.0%, up approximately 570 basis points as compared to last year. The year-over-year improvement was primarily driven by a benefit of 760 basis points from lower freight costs and 230 basis points from year-over-year AUR growth partially offset by 320 basis points from higher cotton and raw material costs and 100 basis points from the adverse impact from foreign currency.
- Operating expense, excluding other operating income, net, up $16 million or 3% compared to last year, with increases in technology expenses and incentive-based compensation, partially offset by lower digital marketing and fulfillment expenses. Operating expense as a percentage of sales increased to 57.3% from 57.0% last year.
- Operating income of
$34 million and$38 million on a reported and adjusted non-GAAP basis, respectively, as compared to operating loss of$10 million and$6 million last year, on a reported and adjusted non-GAAP basis, respectively. - Net income per diluted share of
$0.32 on a reported basis and net income per diluted share$0.39 on an adjusted non-GAAP basis, as compared to net loss per diluted share last year of$0.32 and$0.27 on a reported and adjusted non-GAAP basis, respectively.
Net sales by brand and region for the first quarter are as follows:
(in thousands) | 2023 | 2022 | 1 YR % Change | Comparable sales (1) |
|||||
Net sales by brand: | |||||||||
436,044 | 383,928 | 14% | 14% | ||||||
Hollister (3) | $ | 399,950 | $ | 428,834 | (7)% | (6)% | |||
Total company | $ | 835,994 | $ | 812,762 | 3% | 3% | |||
Net sales by region: (4) | 2023 | 2022 | 1 YR % Change | Comparable sales (1) |
|||||
$ | 636,117 | $ | 585,106 | 9% | 4% | ||||
EMEA | 139,258 | 163,969 | (15)% | (4)% | |||||
APAC | 33,333 | 29,897 | 11% | 22% | |||||
Other (5) | 27,286 | 33,790 | (19)% | (2)% | |||||
International | $ | 199,877 | $ | 227,656 | (12)% | 0% | |||
Total company | $ | 835,994 | $ | 812,762 | 3% | 3% |
(1) Comparable sales are calculated on a constant currency basis. Refer to "REPORTING AND USE OF GAAP AND NON-GAAP MEASURES," for further discussion.
(2) Abercrombie includes the
(3) Hollister includes the Hollister,
(4) Net sales by geographic area are presented by attributing revenues to an individual country on the basis of the country in which the merchandise was sold for in-store purchases and on the basis of the shipping location provided by customers for digital orders.
(5) Other includes all sales that do not fall within
Financial Position and Liquidity |
As of
- Cash and equivalents of
$447 million . This compares to cash and equivalents of$518 million and$468 million as ofJanuary 28, 2023 andApril 30, 2022 , respectively. - Inventories of
$448 million , a decrease of 20% compared toApril 30, 2022 . - Long-term gross borrowings under the company’s senior secured notes of
$300 million (the “Senior Secured Notes”) which mature inJuly 2025 and bear interest at a rate of 8.75% per annum. - Borrowing available under the senior-secured asset-based revolving credit facility (the “ABL Facility”) of
$311 million . - Liquidity, comprised of cash and equivalents and borrowing available under the ABL Facility, of approximately
$758 million . This compares to liquidity of$866 million and$783 million as ofJanuary 28, 2023 andApril 30, 2022 , respectively.
Cash Flow and Capital Allocation |
Details related to the company’s cash flows for the year-to-date period ended
- Net cash used for operating activities of
$1 million . - Net cash used for investing activities of
$46 million . - Net cash used for financing activities of
$22 million .
Depreciation and amortization was
Fiscal 2023 Full Year Outlook |
The following outlook replaces all previous full year guidance. For fiscal 2023, the company now expects:
- Net sales growth in the range of 2 to 4% from
$3.7 billion in 2022. This is an increase to the previous outlook of up 1 to 3%. The current outlook assumes thatAbercrombie will continue to outperform Hollister and theU.S. will continue to outperform International. Also, fiscal 2023 includes a 53rd week for reporting purposes, along with net store expansion. The 53rd week is estimated to add approximately$45 million to total net sales in the fourth quarter and full year of 2023. - Operating margin to be in a range of 5 to 6%. This range improves from the previous outlook of 4 to 5%. The current outlook includes a benefit of around 250 basis points from full year 2022 levels on expected net improvement in freight and raw material costs, partially offset by modest operating margin deleverage from the combination of inflation and increased operating expense investment for the 2025 Always Forward Plan initiatives, including an upgrade of our retail merchandising ERP system.
- Effective tax rate to be in the high-30s. This replaces the previous outlook of mid-40s. The current outlook assumes the continued inability to realize benefits on certain expected tax losses incurred outside of the
U.S. , although to a lesser extent than the prior outlook provided. - Capital expenditures of approximately $160 million.
Fiscal 2023 Second Quarter Outlook |
For the second quarter of fiscal 2023, the company expects:
- Net sales growth to be in the range of 4 to 6% compared to fiscal second quarter 2022 level of $805 million.
- Operating margin to be in the range of 2 to 3% compared to breakeven in Q2 2022 period on expected net improvement in freight and raw material costs, partially offset by modest operating margin deleverage from the combination of inflation and increased operating expense investment for the 2025 Always Forward Plan initiatives, including an upgrade of our retail merchandising ERP system.
- Effective tax rate around 50% with the rate being sensitive to the jurisdictional mix and level of income.
Conference Call |
Today at
https://register.vevent.com/register/BI65574737b0ef4784b2b4d305c8c1a298
A presentation of first quarter results will be available in the “Investors” section at corporate.abercrombie.com at approximately
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 |
This Press Release and related statements by management or spokespeople of
Other Information |
This document includes certain adjusted non-GAAP financial measures where management believes it to be helpful in understanding the company's results of operations or financial position. Additional details about non-GAAP financial measures and a reconciliation of GAAP financial measures to non-GAAP financial measures can be found in the "Reporting and Use of GAAP and Non-GAAP Measures" section. Sub-totals and totals may not foot due to rounding. Net income (loss) and net income (loss) per share financial measures included herein are attributable to
As used in this document, unless otherwise defined "
About |
The brands share a commitment to offering products of enduring quality and exceptional comfort that allow consumers around the world to express their own individuality and style.
Investor Contact: | Media Contact: | |
(614) 283-6751 | (614) 283-6192 | |
Investor_Relations@anfcorp.com | Public_Relations@anfcorp.com |
Condensed Consolidated Statements of Operations | |||||||||||||
(in thousands, except per share data) | |||||||||||||
(Unaudited) | |||||||||||||
Thirteen Weeks Ended | Thirteen Weeks Ended | ||||||||||||
% of |
% of |
||||||||||||
Net sales | $ | 835,994 | 100.0 | % | $ | 812,762 | 100.0 | % | |||||
Cost of sales, exclusive of depreciation and amortization | 326,200 | 39.0 | % | 363,216 | 44.7 | % | |||||||
Gross profit | 509,794 | 61.0 | % | 449,546 | 55.3 | % | |||||||
Stores and distribution expense | 331,613 | 39.7 | % | 337,543 | 41.5 | % | |||||||
Marketing, general and administrative expense | 142,631 | 17.1 | % | 122,149 | 15.0 | % | |||||||
Asset impairment | 4,436 | 0.5 | % | 3,422 | 0.4 | % | |||||||
Other operating income, net | (2,894 | ) | (0.3)% | (3,842 | ) | (0.5)% | |||||||
Operating income (loss) | 34,008 | 4.1 | % | (9,726 | ) | (1.2)% | |||||||
Interest expense, net | 3,443 | 0.4 | % | 7,307 | 0.9 | % | |||||||
Income (loss) before income taxes | 30,565 | 3.7 | % | (17,033 | ) | (2.1)% | |||||||
Income tax expense (benefit) | 12,718 | 1.5 | % | (2,187 | ) | (0.3)% | |||||||
Net income (loss) | 17,847 | 2.1 | % | (14,846 | ) | (1.8)% | |||||||
Less: Net income attributable to noncontrolling interests | 1,276 | 0.2 | % | 1,623 | 0.2 | % | |||||||
Net income (loss) attributable to A&F | $ | 16,571 | 2.0 | % | $ | (16,469 | ) | (2.0)% | |||||
Net income (loss) per share attributable to A&F | |||||||||||||
Basic | $ | 0.33 | $ | (0.32 | ) | ||||||||
Diluted | $ | 0.32 | $ | (0.32 | ) | ||||||||
Weighted-average shares outstanding: | |||||||||||||
Basic | 49,574 | 52,077 | |||||||||||
Diluted | 51,467 | 52,077 |
Reporting and Use of GAAP and Non-GAAP Measures
The company believes that each of the non-GAAP financial measures presented are useful to investors as they provide a measure of the company’s operating performance excluding the effect of certain items which the company believes do not reflect its future operating outlook, such as asset impairment charges, therefore supplementing investors’ understanding of comparability of operations across periods. Management used these non-GAAP financial measures during the periods presented to assess the company’s performance and to develop expectations for future operating performance. Non-GAAP financial measures should be used supplemental to, and not as an alternative to, the company’s GAAP financial results, and may not be calculated in the same manner as similar measures presented by other companies.
In addition, at times the company provides comparable sales, defined as the percentage year-over-year change in the aggregate of: (1) sales for stores that have been open as the same brand at least one year and whose square footage has not been expanded or reduced by more than 20% within the past year, with prior year’s net sales converted at the current year’s foreign currency exchange rate to remove the impact of foreign currency rate fluctuation, and (2) digital net sales with prior year’s net sales converted at the current year’s foreign currency exchange rate to remove the impact of foreign currency rate fluctuation.
The company also provides certain financial information on a constant currency basis to enhance investors’ understanding of underlying business trends and operating performance, by removing the impact of foreign currency exchange rate fluctuations. The effect from foreign currency, calculated on a constant currency basis, is determined by applying current year average exchange rates to prior year results and is net of the year-over-year impact from hedging. The per diluted share effect from foreign currency is calculated using a 26% tax rate.
Schedule of Non-GAAP Financial Measures | |||||||||
Thirteen Weeks Ended |
|||||||||
(in thousands, except per share data) | |||||||||
(Unaudited) | |||||||||
GAAP (1) | Excluded items | Adjusted non-GAAP |
|||||||
Asset impairment (2) | $ | 4,436 | $ | 4,436 | $ | — | |||
Operating income | 34,008 | (4,436 | ) | 38,444 | |||||
Income before income taxes | 30,565 | (4,436 | ) | 35,001 | |||||
Income tax expense (3) | 12,718 | (1,187 | ) | 13,905 | |||||
Net income attributable to A&F | 16,571 | (3,249 | ) | 19,820 | |||||
Net income per diluted share attributable to A&F | $ | 0.32 | $ | (0.06 | ) | $ | 0.39 | ||
Diluted weighted-average shares outstanding: | 51,467 | 51,467 |
(1) “GAAP” refers to accounting principles generally accepted in
(2) Excluded items consist of pre-tax store impairment charges of
(3) The tax effect of excluded items is the difference between the tax provision calculated on a GAAP basis and an adjusted non-GAAP basis.
Schedule of Non-GAAP Financial Measures | |||||||||||
Thirteen Weeks Ended |
|||||||||||
(in thousands, except per share data) | |||||||||||
(Unaudited) | |||||||||||
GAAP (1) | Excluded items | Adjusted non-GAAP |
|||||||||
Asset impairment (2) | $ | 3,422 | $ | 3,422 | $ | — | |||||
Operating loss | (9,726 | ) | (3,422 | ) | (6,304 | ) | |||||
Loss before income taxes | (17,033 | ) | (3,422 | ) | (13,611 | ) | |||||
Income tax benefit (3) | (2,187 | ) | (918 | ) | (1,269 | ) | |||||
Net loss attributable to A&F | $ | (16,469 | ) | $ | (2,504 | ) | $ | (13,965 | ) | ||
Net loss per diluted share attributable to A&F | $ | (0.32 | ) | $ | (0.05 | ) | $ | (0.27 | ) | ||
Diluted weighted-average shares outstanding: | 52,077 | 52,077 |
(1) “GAAP” refers to accounting principles generally accepted in
(2) Excluded items consist of pre-tax store asset impairment charges of
(3) The tax effect of excluded items is the difference between the tax provision calculated on a GAAP basis and an adjusted non-GAAP basis.
Reconciliation of Constant Currency Financial Measures | |||||||||||
Thirteen Weeks Ended |
|||||||||||
(in thousands, except percentage and basis point changes and per share data) | |||||||||||
(Unaudited) | |||||||||||
2023 | 2022 | % Change | |||||||||
Net sales | |||||||||||
GAAP (1) | $ | 835,994 | $ | 812,762 | 3% | ||||||
Impact from changes in foreign currency exchange rates (2) | — | (8,597 | ) | 1% | |||||||
Net sales on a constant currency basis | $ | 835,994 | $ | 804,165 | 4% | ||||||
Gross profit | 2023 | 2022 | BPS Change (3) | ||||||||
GAAP (1) | $ | 509,794 | $ | 449,546 | 570 | ||||||
Impact from changes in foreign currency exchange rates (2) | — | (12,601 | ) | 100 | |||||||
Gross profit on a constant currency basis | $ | 509,794 | $ | 436,945 | 670 | ||||||
Operating income (loss) | 2023 | 2022 | BPS Change (3) | ||||||||
GAAP (1) | $ | 34,008 | $ | (9,726 | ) | 530 | |||||
Excluded items (4) | (4,436 | ) | (3,422 | ) | (10) | ||||||
Adjusted non-GAAP | $ | 38,444 | $ | (6,304 | ) | 540 | |||||
Impact from changes in foreign currency exchange rates (2) | — | (8,639 | ) | 110 | |||||||
Adjusted non-GAAP constant currency basis | $ | 38,444 | $ | (14,943 | ) | 650 | |||||
Net income (loss) attributable to A&F | 2023 | 2022 | $ Change | ||||||||
GAAP (1) | $ | 0.32 | $ | (0.32 | ) | ||||||
Excluded items, net of tax (4) | (0.06 | ) | (0.05 | ) | (0.01) | ||||||
Adjusted non-GAAP | $ | 0.39 | $ | (0.27 | ) | ||||||
Impact from changes in foreign currency exchange rates (2) | — | (0.12 | ) | 0.12 | |||||||
Adjusted non-GAAP constant currency basis | $ | 0.39 | $ | (0.39 | ) |
(1) “GAAP” refers to accounting principles generally accepted in
(2) The estimated impact from foreign currency is determined by applying current period exchange rates to prior year results and is net of the year-over-year impact from hedging. The per diluted share estimated impact from foreign currency is calculated using a 26% tax rate.
(3) The estimated basis point change has been rounded based on the percentage change.
(4) Excluded items consist of
Reconciliation of Constant Currency |
|||||||||||||||
Thirteen Weeks Ended |
|||||||||||||||
(in thousands, except percentage changes) | |||||||||||||||
(Unaudited) | |||||||||||||||
2023 | 2022 | GAAP % Change |
Non-GAAP Constant Currency Basis % Change |
||||||||||||
GAAP | GAAP | Impact From Changes In Foreign Currency Exchanges Rates (1) |
Non-GAAP Constant Currency Basis |
||||||||||||
Net sales by brand: | |||||||||||||||
436,044 | 383,928 | (3,414 | ) | 380,514 | 14% | 15% | |||||||||
Hollister (3) | $ | 399,950 | $ | 428,834 | $ | (5,183 | ) | $ | 423,651 | (7)% | (6)% | ||||
Total company | $ | 835,994 | $ | 812,762 | $ | (8,597 | ) | $ | 804,165 | 3% | 4% | ||||
2023 | 2022 | GAAP % Change |
Non-GAAP Constant Currency Basis % Change |
||||||||||||
GAAP | GAAP | Impact From Changes In Foreign Currency Exchanges Rates (1) |
Non-GAAP Constant Currency Basis |
||||||||||||
Net sales by region: (4) | |||||||||||||||
$ | 636,117 | $ | 585,106 | $ | — | $ | 585,106 | 9% | 9% | ||||||
EMEA | 139,258 | 163,969 | (5,046 | ) | 158,923 | (15)% | (12)% | ||||||||
APAC | 33,333 | 29,897 | (1,395 | ) | 28,502 | 11% | 17% | ||||||||
Other (5) | 27,286 | 33,790 | (2,156 | ) | 31,634 | (19)% | (14)% | ||||||||
International | $ | 199,877 | $ | 227,656 | $ | (8,597 | ) | $ | 219,059 | (12)% | (9)% | ||||
Total company | $ | 835,994 | $ | 812,762 | $ | (8,597 | ) | $ | 804,165 | 3% | 4% | ||||
(1) The estimated impact from foreign currency is determined by applying current period exchange rates to prior year results and is net of the year-over-year impact from hedging. The per diluted share estimated impact from foreign currency is calculated using a 26% tax rate.
(2)
(3) Hollister includes the Hollister,
(4) Net sales by geographic area are presented by attributing revenues to an individual country on the basis of the country in which the merchandise was sold for in-store purchases and on the basis of the shipping location provided by customers for digital orders.
(5) Other includes all sales that do not fall within
Condensed Consolidated Balance Sheets | ||||||||
(in thousands) | ||||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and equivalents | $ | 446,952 | $ | 517,602 | $ | 468,378 | ||
Receivables | 106,149 | 104,506 | 88,807 | |||||
Inventories | 447,806 | 505,621 | 562,510 | |||||
Other current assets | 107,684 | 100,289 | 93,179 | |||||
Total current assets | 1,108,591 | 1,228,018 | 1,212,874 | |||||
Property and equipment, net | 550,810 | 551,585 | 497,976 | |||||
Operating lease right-of-use assets | 692,699 | 723,550 | 671,991 | |||||
Other assets | 205,978 | 209,947 | 224,462 | |||||
Total assets | $ | 2,558,078 | $ | 2,713,100 | $ | 2,607,303 | ||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 221,587 | $ | 258,895 | $ | 311,352 | ||
Accrued expenses | 340,331 | 413,303 | 320,681 | |||||
Short-term portion of operating lease liabilities | 188,520 | 213,979 | 195,599 | |||||
Income taxes payable | 19,023 | 16,023 | 25,400 | |||||
Total current liabilities | 769,461 | 902,200 | 853,032 | |||||
Long-term liabilities: | ||||||||
Long-term portion of operating lease liabilities | $ | 682,996 | $ | 713,361 | $ | 662,322 | ||
Long-term borrowings, net | 297,172 | 296,852 | 303,901 | |||||
Other liabilities | 97,476 | 94,118 | 83,243 | |||||
Total long-term liabilities | 1,077,644 | 1,104,331 | 1,049,466 | |||||
Total |
701,857 | 694,841 | 695,361 | |||||
Noncontrolling interests | 9,116 | 11,728 | 9,444 | |||||
Total stockholders’ equity | 710,973 | 706,569 | 704,805 | |||||
Total liabilities and stockholders’ equity | $ | 2,558,078 | $ | 2,713,100 | $ | 2,607,303 |
Condensed Consolidated Statements of Cash Flows | |||||||
(in thousands, except per share data) | |||||||
(Unaudited) | |||||||
Thirteen Weeks Ended | |||||||
Operating activities | |||||||
Net cash used for operating activities | $ | (560 | ) | $ | (217,787 | ) | |
Investing activities | |||||||
Purchases of property and equipment | $ | (46,391 | ) | $ | (26,292 | ) | |
Proceeds from sale of property and equipment | — | 7,751 | |||||
Net cash used for investing activities | $ | (46,391 | ) | $ | (18,541 | ) | |
Financing activities | |||||||
Purchases of common stock | — | (100,000 | ) | ||||
Other financing activities | (21,956 | ) | (16,945 | ) | |||
Net cash used for financing activities | $ | (21,956 | ) | $ | (116,945 | ) | |
Effect of foreign currency exchange rates on cash | $ | (1,998 | ) | $ | (2,617 | ) | |
Net decrease in cash and equivalents, and restricted cash and equivalents | $ | (70,905 | ) | $ | (355,890 | ) | |
Cash and equivalents, and restricted cash and equivalents, beginning of period | $ | 527,569 | $ | 834,368 | |||
Cash and equivalents, and restricted cash and equivalents, end of period | $ | 456,664 | $ | 478,478 |
Store Count
Thirteen Weeks Ended |
||||||||||||||||||||
Hollister (2) | ||||||||||||||||||||
International | International | International | Total | |||||||||||||||||
180 | 53 | 380 | 149 | 560 | 202 | 762 | ||||||||||||||
New | 1 | 2 | 1 | 2 | 2 | 4 | 6 | |||||||||||||
Permanently closed | (2 | ) | (1 | ) | (4 | ) | (3 | ) | (6 | ) | (4 | ) | (10 | ) | ||||||
179 | 54 | 377 | 148 | 556 | 202 | 758 |
(1)
(2) Hollister includes the company’s Hollister and Gilly Hicks brands. Locations with
(3) This store count excludes one international third-party operated multi-brand outlet store as of each of
Source: Abercrombie & Fitch Management Co.