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Board of Directors Declares Quarterly Dividend of $0.175;
Company Provides Update for 2008
NEW ALBANY, Ohio, Nov. 14 /PRNewswire-FirstCall/ -- Abercrombie & Fitch Co. (NYSE: ANF) today reported unaudited results which reflected third quarter net income of $63.9 million and net income per diluted share of $0.72 for the thirteen weeks ended November 1, 2008, compared to net income of $117.6 million and net income per diluted share of $1.29 for the thirteen weeks ended November 3, 2007.
Third Quarter Highlights
- Total Company net sales decreased 8% to $896.3; comparable store sales decreased 14%
- Total direct-to-consumer net sales decreased 6% to $57.5 million
- Abercrombie & Fitch net sales decreased 8% to $385.8 million; Abercrombie & Fitch comparable store sales decreased 8%
- abercrombie net sales decreased 14% to $109.5 million, abercrombie comparable store sales decreased 20%
- Hollister Co. net sales decreased 7% to $383.6 million; Hollister comparable store sales decreased 18%
- RUEHL net sales increased 7% to $13.5 million; RUEHL comparable store sales decreased 25%
- Net income for the third quarter was $63.9 million
- Net income per diluted share in the third quarter was $0.72
Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said:
"Our third quarter financial results reflect a pull back in consumer spending and a difficult economic environment that is having an affect on all retailers. However, during these difficult times, we remain firmly committed to the aspirational positioning of our brands, providing an unparalleled store experience for our customers and investing in initiatives that will allow us to continue the international expansion of our brands. We are mindful of the current environment and will continue to operate the business with a seasoned and disciplined approach, looking for efficiencies within our operations."
Third Quarter Financial Results
Net sales for the thirteen weeks ended November 1, 2008 decreased 8% to $896.3 million from $973.9 million for the thirteen weeks ended November 3, 2007. Total Company direct-to-consumer net sales decreased 6% to $57.5 million for the thirteen week period ended November 1, 2008, compared to the thirteen week period ended November 3, 2007. Total Company comparable store sales decreased 14% for the thirteen weeks ended November 1, 2008.
The gross profit rate for the quarter was 66.0%, down 20 basis points compared to last year. The decrease in gross profit rate was primarily due to an increase in the markdown rate as a result of lower than expected sales during the quarter.
Stores and distribution expense, as a percentage of sales, increased 660 basis points to 43.1% from 36.5% and marketing, general and administrative expense, as a percentage of sales, increased 100 basis points to 11.7% from 10.7%. The Company reduced its store payroll hours and home office expense in response to declining sales. However, the increase in the operating expense rate is primarily attributed to the limitation on leveraging fixed expenses due to the comparable store sales decline. This quarter's operating expense also included expense related to minimum wage and manager salary increases and flagship pre-opening rent.
Operating income for the third quarter was $100.1 million compared to $186.6 million last year.
Interest income for the third quarter decreased to $0.6 million compared to $4.6 million last year. The decrease was attributed to a lower average rate of return on investments compared to last year.
The effective tax rate for the third quarter was 36.5% compared to 38.5% last year. The effective tax rate for the third quarter of fiscal 2008 reflects the favorable impact from the settlement of tax audits.
Net income for the third quarter was $63.9 million compared to $117.6 million last year.
Net income per diluted share for the third quarter decreased 44% to $0.72 compared to $1.29 last year.
2008 Update
The Company now expects net income per diluted share for the fourth quarter of fiscal 2008 to be in the range of $1.00 to $1.05 and net income per diluted share for fiscal 2008 to be in the range of $3.27 to $3.32. The fourth quarter earnings guidance assumes a negative 26% comparable store sales scenario (in line with the early November trend), approximately $5 million in incremental expense from minimum wage rate and manager salary increases, and approximately $6 million in pre-opening rent expense for future flagship stores.
The Company now plans total capital expenditures for Fiscal 2008 to be between $390 million and $395 million with approximately $260 million of this amount allocated to new store construction and store remodels. Approximately $50 million is allocated to "refresh" improvements and other brand enhancing investments planned for existing stores and the balance is allocated to home office, information technology, and direct-to-consumer infrastructure investments.
For Fiscal 2008, the Company now expects to increase gross square-footage by approximately 9%. In North America, the Company expects to open 94 new non-flagship stores including two new Abercrombie & Fitch stores, 63 new Hollister Co. stores, 12 new abercrombie stores, six new RUEHL stores and 11 new Gilly Hicks stores by the end of fiscal 2008. The Company also plans to open three new, non-flagship Hollister Co. stores in the United Kingdom in Fiscal 2008.
Other Developments
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 16, 2008 to shareholders of record at the close of business on November 28, 2008.
The Company opened its first European Hollister Co. mall-based store at the Brent Cross shopping centre in the suburbs of London in late October.
The Company has recently received final approval to open an Abercrombie & Fitch flagship on the Champs Elysees in Paris in 2011.
The Company remains on schedule to open flagship locations around the world in 2009, including a Hollister flagship in New York, abercrombie flagships in New York and Milan, and Abercrombie & Fitch flagships in Copenhagen, Milan and Tokyo. The company continues to pursue lease arrangements for additional store locations in Europe and Asia.
The Company will report November sales results on Thursday, December 4th, 2008.
The Company operated 353 Abercrombie & Fitch stores, 209 abercrombie stores, 495 Hollister Co. stores, 27 RUEHL stores and 13 Gilly Hicks stores in the United States at the end of fiscal October. The Company operates three Abercrombie & Fitch stores, one abercrombie store, three Hollister Co. stores in Canada, and one Abercrombie & Fitch store and one Hollister Co. store in London, England. The Company operates e-commerce websites at www.abercrombie.com, www.abercrombiekids.com, and www.hollisterco.com and www.RUEHL.com.
Today at 8:30 AM, Eastern Time, the Company will conduct a conference call. Management will discuss the Company's performance, its plans for the future and will accept questions from participants. To listen to the live conference call, dial (800) 811-0667 or internationally at (913) 981-4901. To listen via the internet, go to www.abercrombie.com, select the Investors page and click on 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 8532483; or for 12 months by visiting the Company's website at www.abercrombie.com.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
A&F cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this Press Release or made by management of A&F involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond the Company's control. Words such as "estimate," "project," "plan," "believe," "expect," "anticipate," "intend," and similar expressions may identify forward-looking statements. The following factors, in addition to those included in the disclosure under the heading "FORWARD-LOOKING STATEMENTS AND RISK FACTORS" in "ITEM 1A. RISK FACTORS" of A&F's Annual Report on Form 10-K for the fiscal year ended February 2, 2008, in some cases have affected and in the future could affect the Company's financial performance and could cause actual results for the 2008 fiscal year and beyond to differ materially from those expressed or implied in any of the forward-looking statements included in this Press Release or otherwise made by management: changes in consumer spending patterns and consumer preferences; the effects of political and economic events and conditions domestically and in foreign jurisdictions in which the Company operates, including, but not limited to, acts of terrorism or war; the impact of competition and pricing; changes in weather patterns; postal rate increases and changes; paper and printing costs; market price of key raw materials; ability to source product from its global supplier base; political stability; currency and exchange risks and changes in existing or potential duties, tariffs or quotas; availability of suitable store locations at appropriate terms; ability to develop new merchandise; ability to hire, train and retain associates; and the outcome of pending litigation. Future economic and industry trends that could potentially impact revenue and profitability are difficult to predict. Therefore, there can be no assurance that the forward-looking statements included in this Press Release will prove to be accurate. In light of the significant uncertainties in the forward- looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company, or any other person, that the objectives of the Company will be achieved. The forward-looking statements herein are based on information presently available to the management of the Company. Except as may be required by applicable law, the Company assumes no obligation to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.
Abercrombie & Fitch Co.
Condensed Consolidated Statements of Income
(Unaudited)
Thirteen Weeks Ended November 1, 2008 and Thirteen Weeks Ended
November 3, 2007
(in thousands, except per share data)
ACTUAL ACTUAL
% of % of
2008 Sales 2007 Sales
Net Sales $896,344 100.0% $973,930 100.0%
Cost of Goods Sold 304,401 34.0% 328,887 33.8%
Gross Profit 591,943 66.0% 645,043 66.2%
Total Stores and Distribution Expense 386,545 43.1% 355,770 36.5%
Total Marketing, General and
Administrative Expense 104,959 11.7% 103,996 10.7%
Other Operating Income, Net 299 0.0% (1,310) -0.1%
Operating Income 100,140 11.2% 186,587 19.2%
Interest Income, Net (560) -0.1% (4,618) -0.5%
Income Before Income Taxes 100,700 11.2% 191,205 19.6%
Income Tax Expense 36,800 4.1% 73,620 7.6%
Effective Rate 36.5% 38.5%
Net Income $63,900 7.1% $117,585 12.1%
Net Income Per Share:
Basic $0.73 $1.35
Diluted $0.72 $1.29
Weighted-Average Shares Outstanding:
Basic 87,034 86,895
Diluted 88,806 91,133
Abercrombie & Fitch Co.
Condensed Consolidated Statements of Income
(Unaudited)
Thirty-Nine Weeks Ended November 1, 2008 and Thirty-Nine Weeks Ended
November 3, 2007
(in thousands, except per share data)
ACTUAL ACTUAL
% of % of
2008 Sales 2007 Sales
Net Sales $2,542,321 100.0% $2,520,878 100.0%
Cost of Goods Sold 823,243 32.4% 835,128 33.1%
Gross Profit 1,719,078 67.6% 1,685,750 66.9%
Total Stores and Distribution
Expense 1,089,052 42.8% 998,425 39.6%
Total Marketing, General and
Administrative Expense 318,681 12.5% 292,611 11.6%
Other Operating Income, Net (3,396) -0.1% (8,715) -0.3%
Operating Income 314,741 12.4% 403,429 16.0%
Interest Income, Net (9,963) -0.4% (12,472) -0.5%
Income Before Income Taxes 324,704 12.8% 415,901 16.5%
Income Tax Expense 120,856 4.8% 156,960 6.2%
Effective Rate 37.2% 37.7%
Net Income $203,848 8.0% $258,941 10.3%
Net Income Per Share:
Basic $2.35 $2.96
Diluted $2.27 $2.82
Weighted-Average Shares
Outstanding:
Basic 86,737 87,623
Diluted 89,636 91,937
Abercrombie & Fitch Co.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
ASSETS November 1, 2008 February 2, 2008
Current Assets
Cash and Equivalents $298,043 $118,044
Marketable Securities - 530,486
Receivables 57,119 53,801
Inventories 504,898 333,153
Deferred Income Taxes 38,238 36,128
Other Current Assets 97,836 68,643
Total Current Assets 996,134 1,140,255
Property and Equipment, Net 1,443,010 1,318,291
Marketable Securities 261,814 -
Other Assets 116,565 109,052
TOTAL ASSETS $2,817,523 $2,567,598
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Outstanding
Checks $210,597 $151,798
Accrued Expenses 211,819 280,910
Debt 100,000 -
Deferred Lease Credits 42,584 37,925
Income Taxes Payable - 72,480
Total Current Liabilities 565,000 543,113
Long-Term Liabilities
Deferred Income Taxes 40,125 22,491
Deferred Lease Credits 219,789 213,739
Other Liabilities 199,516 169,942
Total Long-Term Liabilities 459,430 406,172
Total Shareholders' Equity 1,793,093 1,618,313
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $2,817,523 $2,567,598
SOURCE Abercrombie & Fitch
CONTACT: Eric Cerny, Manager, Investor Relations, +1-614-283-6385
Web site: http://www.abercrombie.com
http://www.abercrombiekids.com
(ANF)