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ABERCROMBIE & FITCH REPORTS SECOND QUARTER RESULTS

New Albany, Ohio, August 30, 2016: Abercrombie & Fitch Co. (NYSE:ANF) today reported a GAAP net loss per diluted share of $0.19 for the second quarter ended July 30, 2016, compared to a GAAP net loss per diluted share of $0.01 for the second quarter last year. Excluding certain items, the company reported an adjusted non-GAAP net loss per diluted share of $0.25 for the second quarter, compared to adjusted non-GAAP net income per diluted share of $0.12 last year. The results for the quarter reflect an adverse impact related to year-over-year changes in foreign currency exchange rates of approximately $0.08 per diluted share.

A description of the use of non-GAAP financial measures and a schedule reconciling GAAP financial measures to adjusted non-GAAP financial measures accompanies this release.

Arthur Martinez
, Executive Chairman, said:

"Our results for the quarter were largely in line with the expectations we set on last quarter's earnings call. Flagship and tourist locations continued to account for the vast majority of the comparable sales decline as traffic remained a significant headwind. We were encouraged, however, by strong growth in the direct-to-consumer business, both domestically and internationally, and by a comparable sales recovery in the Hollister European business, including in the U.K. In addition, conversion trends were positive in both channels, across brand and geography. Overall, we remained disciplined as gross margin rate was substantially maintained on a constant currency basis and expense and inventory were tightly controlled.

This quarter we began to roll out programs that reflect our new brand positions for both Abercrombie and Hollister. We look forward to strengthening our brands as we express these positionings across all customer touch points.

As we look to the rest of the year, we now expect flagship and tourist locations will continue to weigh on the business. Recognizing we are in a challenging environment, we are confident, however, that we are focusing on the right priorities and we expect to see traction in our business as we introduce new product and invest in marketing to drive awareness and relevance for our brands."

Second Quarter Sales Results

Net sales for the second quarter of $783.2 million were down 4% versus last year, with comparable sales for the second quarter down 4%.

Fiscal 2016 Comparable Sales Summary (1)
Brand Geography
First Quarter Second Quarter Year-to-Date First Quarter Second Quarter Year-to-Date
Abercrombie(2) (8)% (7)% (7)% United States (2)% (4)% (3)%
Hollister 0% (2)% (1)% International (7)% (4)% (5)%
Total Company (4)% (4)% (4)% Total Company (4)% (4)% (4)%

(1) Comparable sales are calculated on a constant currency basis.

(2) Abercrombie includes the Abercrombie & Fitch and abercrombie kids brands.

By brand, net sales for the second quarter decreased 5% to $363.1 million for Abercrombie and decreased 4% to $420.1 million for Hollister versus last year.

By geography, net sales for the second quarter decreased 7% to $478.8 million in the U.S. and were approximately flat at $304.4 million in international markets versus last year.

Direct-to-consumer sales grew to approximately 23% of total company net sales for the second quarter, compared to approximately 21% of total company net sales last year.

Additional Second Quarter Results Commentary

The gross profit rate for the second quarter was 60.9%, 140 basis points lower than last year. Excluding certain items last year, the gross profit rate decreased 20 basis points on a constant currency basis, primarily due to higher average unit costs, partially offset by higher average unit retails.

Stores and distribution expense for the second quarter was $382.9 million, down from $389.2 million last year. Excluding certain items last year, stores and distribution expense decreased $4.9 million, primarily due to the realization of savings on lower sales and expense reduction efforts, partially offset by higher direct-to-consumer expense.

Marketing, general and administrative expense for the second quarter was $111.7 million, down from $119.8 million last year. Excluding certain items last year, marketing, general and administrative expense increased $7.6 million, primarily due to higher marketing and other expenses.

Asset impairment charges of $6.4 million for the second quarter were excluded from adjusted results.

Net other operating income for the second quarter was $13.1...


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