Abercrombie & Fitch Company · NYSE:ANF
Abercrombie & Fitch — Investor Day (April 2018)
119 slides from Abercrombie & Fitch's investor day presentation, Apr 30, 2018
Slide 1: Investor Day April 25, 2018 New York
INVESTOR DAY APRIL 25, 2018 NEW YORK
Slide 2: Agenda
AGENDA CORPORATE STRATEGY & VISION FRAN HOROWITZ GLOBAL TRANSFORMATION JOANNE CREVOISERAT HOLLISTER & GILLY HICKS OVERVIEW KRISTIN SCOTT A&F AND ABERCROMBIE KIDS OVERVIEW STACIA ANDERSEN FINANCIAL OBJECTIVES SCOTT LIPESKY MORNING IN REVIEW FRAN HOROWITZ PANEL Q&A EXECUTIVE LEADERSHIP
Slide 3: Forward Looking Statements
FORWARD LOOKING STATEMENTS 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 presentation or made by management or spokespeople of A&F involve risks and uncertainties and are subject to change based on
Slide 4: Californix
7 CALIFORNIX — <sey aa
Slide 5: Fran Horowitz, Chief Executive Officer
FRAN HOROWITZ Chief Executive Officer ABERCROMBIE & FITCH CO.
Slide 6: Transforming While Growing
TRANSFORMING WHILE GROWING LOW SINGLE-DIGIT TOTAL SALES CAGR DOUBLE 2017 ADJ. EBIT MARGIN STRONG ASSETS & BALANCE SHEET OMNICHANNEL INFRASTRUCTURE THE RIGHT TEAM & RESOURCES CLEAR PLAN POSITIVE COMP SALES GLOBAL GROWTH GROSS MARGIN EXPANSION OPEX LEVERAGE
Slide 7: Executive leadership team
FRAN HOROWITZ Chief Executive Officer KRISTIN SCOTT President, Hollister and Gilly Hicks STACIA ANDERSEN President, Abercrombie & Fitch and kids JOANNE CREVOISERAT Chief Operating Officer SCOTT LIPESKY Chief Financial Officer
Slide 8: Strategic Pillars
STRATEGIC PILLARS INSPIRE CUSTOMERS INNOVATE RELENTLESSLY DEVELOP LEADERS
Slide 9: Convictions
CONVICTIONS PERSONAL CONNECTION BRANDS MATTER STORES EVOLVING CONTINUOUS INNOVATION
Slide 10: Our Journey
OUR JOURNEY STABILIZE TRANSFORM ACCELERATE
Slide 11: Three Year Objectives
THREE YEAR OBJECTIVES LOW SINGLE-DIGIT TOTAL SALES CAGR DOUBLE 2017 ADJUSTED EBIT MARGIN MODEST GROSS MARGIN EXPANSION OPERATING EXPENSE LEVERAGE GLOBAL MARKET EXPANSION POSITIVE COMPARABLE SALES
Slide 12: Our Vision
OUR VISION STABILIZE TRANSFORM ACCELERATE $5B FAMILY OF GLOBAL LEADING LIFESTYLE BRANDS DRIVE COMPARABLE SALES GROWTH EXPAND GROSS MARGINS LEVERAGE EXPENSES TAKE SHARE IN THE US EXPAND GLOBALLY
Slide 13: Our Team, Our Time, Our Assets
Diverse experience Proven capabilities Customer-centric Financial discipline OUR TEAM Evolving market preferences Agility and flexibility to adapt Proven playbook OUR TIMEOUR ASSETS Iconic Brands Global operating experience Digital and omni infrastructure Balance Sheet and resources
Slide 14: Stabilize: Product, Voice, Experience
STABILIZE PRODUCT VOICE EXPERIENCE
Slide 15: Our Journey: Stabilize
OUR JOURNEY STABILIZE TRANSFORM ACCELERATE ORIENTED AROUND CUSTOMER ALIGNED PRODUCT, VOICE & EXPERIENCE RETURNED TO GROWTH BUILT THE FOUNDATION
Slide 16: Differentiation: People, Product, Process
DIFFERENTIATION PEOPLE PRODUCT PROCESS
Slide 17: What do we stand for?
WHAT DO WE STAND FOR? WHAT IS OUR PURPOSE? WHO DO WE SERVE? WHO ARE WE?
Slide 18: Talent: Empowered, Customer Focused, Experienced
TALENT EMPOWERED CUSTOMER FOCUSED EXPERIENCED
Slide 19: Then and Now: Customers and Brands
THEN NOW CUSTOMERSBRANDS
Slide 20: Then and Now: Marketing
THEN NOW MARKETING
Slide 21: Then and Now: Design
THEN NOW DESIGN
Slide 22: Then and Now: Merchants
THEN MERCHANTS NOW
Slide 23: Then and Now: Supply Chain & Sourcing
THEN NOW SUPPLY CHAIN & SOURCING
Slide 24: Then and Now: Stores
THEN NOW STORES
Slide 25: Then and Now: Digital
THEN NOW DIGITAL
Slide 26: Milestones
MILESTONES New board composition Fran joins Launched wholesale Formed Office of the Chairman of the Board Launched Franchise Fran promoted to President & Chief Merchandising Officer Launched Club CaliLaunched Hco prototype Launched Hco on Tmall Launched A&F Prototype Scott rejoins as CFO A&F positiv
Slide 27: Transforming While Growing
TRANSFORMING WHILE GROWING LOW SINGLE-DIGIT TOTAL SALES CAGR DOUBLE 2017 ADJ. EBIT MARGIN STRONG ASSETS & BALANCE SHEET OMNICHANNEL INFRASTRUCTURE THE RIGHT TEAM & RESOURCES CLEAR PLAN POSITIVE COMP SALES GLOBAL GROWTH GROSS MARGIN EXPANSION OPEX LEVERAGE
Slide 28: Our Vision
OUR VISION STABILIZE TRANSFORM ACCELERATE $5B FAMILY OF GLOBAL LEADING LIFESTYLE BRANDS
Slide 29: Global Transformation: Joanne Crevoiserat
GLOBAL TRANSFORMATION JOANNE CREVOISERAT Chief Operating Officer
Slide 30: Our Journey: Transform
OUR JOURNEY STABILIZE TRANSFORM ACCELERATE
Slide 31: Transformation
TRANSFORMATION OPTIMIZE STORE NETWORK ENHANCE OMNICHANNEL CAPABILITIES STREAMLINE CONCEPT TO CUSTOMER OPTIMIZE MARKETING INVESTMENTS
Slide 32: Optimize Store Network
OPTIMIZE STORE NETWORK
Slide 33: Optimize Store Network: Today vs Peak
OPTIMIZE STORE NETWORK TODAY ~1,100 ~870 PEAK
Slide 34: US Store Density
US STORE DENSITY Evolving customer preferences Declining mall traffic Lease flexibility 1. Store counts as of 2017 Source: Cowen, Experiential Retail (April 2018) 1 UNITED STATES 285 MALLS HOLLISTER 394 ~1,200 A&F / KIDS
Slide 35: North America
Close underperforming stores Invest in improved experiences Selectively open stores COMP SALES GROWTH & PRODUCTIVITY NORTH AMERICA
Slide 36: Europe
Shift to more productive spaces Open stores and capture local customers Build brand awareness & consideration LONG-TERM OPPORTUNITY $1.0+B EUROPE
Slide 37: Asia
Selectively open stores Build brand awareness on T-Mall LONG-TERM OPPORTUNITY $500+M ASIA
Slide 38: Prototypes
PROTOTYPES HOLLISTER ABERCROMBIE & FITCH ABERCROMBIE KIDS
Slide 39: Flagship Shift
FLAGSHIP SHIFT PEDDER STREET ~$550 SALES / GSF HARBOUR CITY ~$1,700 SALES / GSF
Slide 40: Global Network Strategy
NORTH AMERICA Close underperforming stores Invest in improved experiences Selectively open stores EUROPE Shift to more productive spaces Open stores and capture local customers Build brand consideration with wholesale ASIA Selectively open stores Build brand awareness on T-Mall GLOBAL NETWORK STRATE
Slide 41: Enhance Omnichannel Capabilities
ENHANCE OMNICHANNEL CAPABILITIES
Slide 42: Omnichannel Infrastructure
OMNICHANNEL INFRASTRUCTURE 20 WEBSITES 11 LANGUAGES 29 CURRENCIES
Slide 43: Enhance Digital & Omni Capabilities
ENHANCE DIGITAL & OMNI CAPABILITIES ~$400M INVESTED (SINCE 2010) 2017 EST INDUSTRY AVERAGE (US) 2017 28% 2010 12% DIGITAL PENETRATION
Slide 44: Scan to Shop, Shop the Look, Seamless Sharing
SCAN TO SHOP SHOP THE LOOK SEAMLESS SHARING
Slide 45: Expand Capabilities
EXPAND CAPABILITIES FOUNDATION RESERVE IN STORE SHIP FROM STORE POPINS ORDER IN STORE FUTURE INVESTMENT STORES TECHNOLOGY ASSOCIATE SELLING TOOLS
Slide 46: Optimize Omni Fulfillment
ORDER PLACED PRODUCT LOCATION PAYMENT LOCATION DELIVERY LOCATION STORES SHIP TO HOME/ SHIP FROM STORE POPINS ORDER IN STORE RESERVE IN STORE OPTIMIZE OMNI FULFILLMENT CUSTOMER Excludes return capabilities, including return to store or online returns
Slide 47: Streamline Concept to Customer
STREAMLINE CONCEPT TO CUSTOMER
Slide 48: Agile Supply Chain
AGILE SUPPLY CHAIN CHASE READ & REACT FABRIC PLATFORMING STRONG SUPPLIER RELATIONSHIPS DIVERSE SOURCING NETWORK
Slide 49: Concept to Customer
CONCEPT TO CUSTOMER WHAT WE BUY WHERE WE SOURCE HOW WE BUY HOW WE ALLOCATE HOW WE PRICE
Slide 50: Optimize Marketing Investments
OPTIMIZE MARKETING INVESTEMENTS
Slide 51: Loyalty Program Member Accounts
LOYALTY PROGRAM MEMBER ACCOUNTS (IN MILLIONS) CLUB CALI A&F CLUB 2017 14 10 4 2016 5 5
Slide 52: Personalization
PERSONALIZATION PERSONALIZE MARKETING TARGET PROMOTIONS TAILOR EXPERIENCE MEASURE & LEARN OPTIMIZE MEDIA DATA & ANALYTICS
Slide 53: Our Journey: Transform Priorities
OUR JOURNEY STABILIZE TRANSFORM ACCELERATE OPTIMIZE STORE NETWORK ENHANCE OMNI CAPABILITIES STREAMLINE CONCEPT TO CUSTOMER OPTIMIZE MARKETING INVESTMENTS
Slide 54: Hollister: Kristin Scott
HOLLISTER KRISTIN SCOTT President, Hollister and Gilly Hicks
Slide 55: Brand DNA
CONFIDENTIAL BRAND DNA DNA CAREFREE CALIFORNIA FREEDOM TO BELONG ENDLESS POSSIBILITIES BRAND NATURAL STATE PLAYFUL EXPRESSION IDEALISTIC SPIRIT PRODUCT CONVICTION WE BELIEVE IN LIBERATING THE SPIRIT OF SUMMER INSIDE EVERYONE POSITION EFFORTLESS CALIFORNIAN STYLE CREATED TO MAKE FREEDOM AND POSSIBILI
Slide 56: Our Customer
OUR CUSTOMER STRESSED CREATIVE ACHIEVEMENT ORIENTATED ACCEPTING SELF- STARTERS INCLUSIVE CAREFREE CALIFORNIA ENDLESS POSSIBILITIES FREEDOM TO BELONG GEN Z
Slide 57: 2017: Product, Voice, Experience
2017 PRODUCT VOICE EXPERIENCE
Slide 58: Customer at the Center
CUSTOMER AT THE CENTER POINTS OF FEEDBACK ~1 M STORE VISITS ~2,000 CUSTOMER VOICES ~40,000
Slide 59: Where Our Customers Are
WHERE OUR CUSTOMERS ARE CUSTOMERS @BEAUTYCON @SNEAKERCON @COFFEE RUNS @HIGH SCHOOLS
Slide 60: Product
PRODUCT
Slide 61: Must Win, Must Grow
MUST WIN MUST GROW
Slide 62: Slide 62
Slide 63: Voice
VOICE
Slide 64: Social, Video, Music, Gaming, Discovery
► Industry leading Instagram engagement ► Snapchat “Best Filter of 2017” ► AwesomenessTV show, This is Summer ► Double-digit lifts across metrics ► Spotify generated 1+M views ► Artist collaborations ► 4.5+M plays ► 15+ years playtime / engagement SOCIAL VIDEO MUSIC GAMING DISCOVERY
Slide 65: Experience
EXPERIENCE
Slide 66: Enhanced Experience
OMNICHANNEL CLUB CALI REAL ESTATE STORE STAFFING ► Industry leader in Omnichannel customer experiences ► Encouraged by the engagement ► 10+M members in 2 years ► High spend & transaction rates ► Open & easy-to- shop remodels ► ~70% of best malls remodeled ► Empowered associates ► New robust training
Slide 67: 2018: Product, Voice, Experience
2018 PRODUCT VOICE EXPERIENCE
Slide 68: Product: Must Win, Must Grow
PRODUCT MUST WIN MUST GROW PRODUCT DISTORTIONS SPEED TO MARKET
Slide 69: Voice: Carpe Now
VOICE AWESOMENESS @ CARPE NOW PRESENTED BY HOLLISTER A
Slide 70: Slide 70
Slide 71: Innovative Marketing
INNOVATIVE MARKETING LLIS7 ae AWESOMENESS @ (Nusa CARPE NeW Vaan’ pd Nl K PRESENTED BY HOLLISTER le <1 EC\S
Slide 72: Slide 72
Slide 73: Experience: Real Estate, Club Cali, Omnichannel
EXPERIENCE REAL ESTATE CLUB CALI OMNICHANNEL
Slide 74: Our Journey: Hollister Summary
OUR JOURNEY STABILIZE TRANSFORM ICONIC BRANDS STRONG FOUNDATIONS CUSTOMER FOCUSED EXPERIENCED TEAM GROWTH OPPORTUNITY
Slide 75: Intermission
INTERMISSION INVESTOR DAY APRIL 25, 2018 NEW YORK
Slide 76: Abercrombie & Fitch: Stacia Andersen
STACIA ANDERSEN President, Abercrombie & Fitch and kids ABERCROMBIE & FITCH
Slide 77: Our Customer
OUR CUSTOMER INSPIRATION AGED 21-24 DISCERNING CHANGE AGENTS INDEPENDENT DIGITAL NATIVES INFLUENTIAL INNOVATIVE
Slide 78: A&F Brand DNA
CONFIDENTIAL CONVICTION POSITION A&F BRAND DNA 78 DNA BRAND AUDACIOUSLY OPTIMISTIC PUSHING YOU TO DISCOVER DARING SPIRIT QUALITY CRAFTSMANSHIP CLASSIC; ALL-AMERICAN CASUAL; EFFORTLESS PRODUCT WE BELIEVE THAT ONLY THROUGH THE PURSUIT OF ADVENTURE CAN YOU FEEL TRULY ALIVE CASUAL ALL-AMERICAN STYLE THA
Slide 79: Slide 79
Slide 80: 2017: Product, Voice, Experience
2017 PRODUCT VOICE EXPERIENCE
Slide 81: Product
PRODUCT
Slide 82: Product: Assortment Architecture, Versatility, Inventory
PRODUCT: • ASSORTMENT ARCHITECTURE • VERSATILITY, COMFORT, FIT • INVENVTORY ASSORTMENT ARCHITECTURE VERSATILITY INVENTORY
Slide 83: Slide 83
Slide 84: Voice
VOICE
Slide 85: Site Visits, Social Mentions, Brand Impressions
SITE VISITS 400,000+ YOY SOCIAL MENTIONS +30% BRAND IMPRESSIONS 300+M
Slide 86: Innovative Marketing
INNOVATIVE MARKETING IMPRESSIONS AMONG 18 TO 24-YEAR-OLD SNAPCHAT USERS 50M ADVANCED THOR & JUSTICE LEAGUE SCREENINGS 30+
Slide 87: Experience
EXPERIENCE
Slide 88: Omnichannel, Loyalty, T-Mall, Store Experience
► 5-star app ► POPinS ► Order-in-store ► Reserve-in-store ► 4 M customers ► Members spent & transacted more ► #1 ranked men’s store on launch day ► Exceeded 2017 sales expectations ► Started prototype rollout ► Enhanced fitting rooms ► Store training OMNICHANNEL LOYALTY T-MALL STORE EXPERIENCE
Slide 89: 2018: Product, Voice, Experience
2018 PRODUCT VOICE EXPERIENCE
Slide 90: Product: Must Win / Must Grow
PRODUCT MUST WIN / MUST GROW TAILORED ASSORTMENT SPEED TO MARKET
Slide 91: Voice: A&F Club Experiences
VOICE A&F CLUB EXPERIENCES MUSIC FESTIVALS AMBASSADOR PROGRAM
Slide 92: Experience: Campus Stores, Prototype Rollout, Expansion
EXPERIENCE CAMPUS BASED STORES PROTOTYPE STORE ROLLOUT EUROPE / ASIA EXPANSION
Slide 93: Abercrombie Kids
ABERCROMBIE KIDS
Slide 94: Slide 94
Slide 95: A&F Kids Brand DNA
A&F KIDS BRAND DNA CHILDHOOD WIDE EYED WONDER YOUTHFUL SPIRIT BRAND DNA CREATIVE EXPRESSION PERFECT IMPERFECTION ENDURING QUALITY PRODUCT DNA CONVICTION WE BELIEVE KIDS ARE PERFECT JUST THE WAY THEY ARE POSITION WE CREATE PRODUCT OF ENDURING QUALITY, CRAFTED TO ENCOURAGE KIDS TO PLAY, EXPRESS THEIR
Slide 96: Everybody Collection
EVERYBODY COLLECTION “…the move to advertise gender neutral apparel in stores is groundbreaking” “We wish Abercrombie Kids’ new gender- neutral collection was around when we were young” “Abercrombie & Fitch is breaking gender barriers with their new unisex collection…” “Fashion should be fun, especi
Slide 97: Aquarium Campaign
AQUARIUM CAMPAIGN REVENUE + 21% TRAFFIC +200%
Slide 98: Kids Prototype
KIDS PROTOTYPE SMALLER, MORE PRODUCTIVE DESIGNED FOR PLAY
Slide 99: Our Journey: A&F and Kids Summary
OUR JOURNEY STABILIZE TRANSFORM ICONIC BRANDS STRONG FOUNDATIONS CUSTOMER FOCUSED EXPERIENCED TEAM GROWTH OPPORTUNITY
Slide 100: Financial Objectives: Scott Lipesky
SCOTT LIPESKY Chief Financial Officer FINANCIAL OBJECTIVES
Slide 101: Our Journey: Accelerate
OUR JOURNEY STABILIZE TRANSFORM ACCELERATE
Slide 102: Three Year Financial Objectives
LOW SINGLE-DIGIT TOTAL SALES CAGR DOUBLE 2017 ADJUSTED EBIT MARGIN 2.9% MODEST GROSS MARGIN EXPANSION OPERATING EXPENSE LEVERAGE GLOBAL MARKET EXPANSION POSITIVE COMPARABLE SALES TRANSFORM
Slide 103: Comp Sales Drivers
Loyalty Marketing TRAFFIC Must win / Must grow Seamless Experience Store Training & Incentives CONVERSION Data & Analytics Brand Health AVERAGE UNIT RETAIL Store Remodels & Prototypes COMP SALES DRIVERS
Slide 104: Global Market Expansion: $1.5B Addressable Opportunity
$1.5B ADDRESSABLE INTERNATIONAL OPPORTUNITY GLOBAL MARKET EXPANSION $0.8B 2017 SALES $1.0B OPPORTUNITY $0.4B 2017 SALES $0.5B OPPORTUNITY EUROPE ASIA & ROW ROW EXCLUDES CANADA
Slide 105: Global Market Expansion: Fleet Activity
GLOBAL MARKET EXPANSION ~3X $/GSF PRODUCTIVITY OF OPENINGS VS. CLOSURES FLEET ACTIVITY 2015-2017 OPENINGS 59 CLOSURES (152) NET CHANGE (93)
Slide 106: Gross Margin Expansion: Concept to Customer
AVERAGE UNIT RETAIL DRIVE GROWTH BRAND HEALTH CONCEPT TO CUSTOMER WHAT WE BUY WHERE WE SOURCE HOW WE BUY HOW WE ALLOCATE HOW WE PRICE GROSS MARGIN EXPANSION
Slide 107: Gross Margin Expansion
GROSS MARGIN EXPANSION AVERAGE UNIT COST FLAT TO UP SLIGHTLY INFLATION PRESSURE SOURCING INITIATIVES
Slide 108: Operating Expense Reduction
OPERATING EXPENSE REDUCTION $400M GROSS EXPENSE SAVINGS SINCE 2013 CONTINUED PROFIT IMPROVEMENT MINDSET
Slide 109: Operating Expense Leverage
CONTINUOUS PROFIT IMPROVEMENT STORE OCCUPANCY TRANSFORMATION INITIATIVES OPERATING EXPENSE LEVERAGE WHAT’S NEXT LEVERAGE FIXED EXPENSE COMP GROWTH
Slide 110: Investment and Evolving Cost Structure
INVESTMENT INCREASED COST EVOLVING COST STRUCTURE INFLATION ANALYTICS CAPABILITIES MARKETING & ENGAGEMENT SHIFT TO DIGITAL
Slide 111: Capital Allocation Philosophy
CAPITAL ALLOCATION PHILOSOPHY INVEST & TRANSFORM THE BUSINESS ANNUAL CAPITAL EXPENDITURES $125 – 175 M RETURN EXCESS CASH TO SHAREHOLDERS MAINTAIN DIVIDEND SHARE REPURCHASES 1 2
Slide 112: Strong Balance Sheet
$935M Q4 2017 $700M MINIMUM LIQUIDITY TARGET STORE CLOSURES (INCL. FLAGSHIPS) FLEET PROTOTYPE CONVERSIONS NEW STORE OPENINGS TRANSFORMATION INVESTMENTS STRONG BALANCE SHEET ACCELERATION OPPORTUNITIES
Slide 113: Our Journey: Drive Shareholder Value
OUR JOURNEY STABILIZE TRANSFORM ACCELERATE GROW SALES EXPAND MARGINS MANAGE EXPENSES DRIVE SHAREHOLDER VALUE
Slide 114: Morning in Review
FRAN HOROWITZ Chief Executive Officer MORNING IN REVIEW
Slide 115: Growing While Transforming
GROWING WHILE TRANSFORMING LOW SINGLE-DIGIT TOTAL SALES CAGR DOUBLE 2017 ADJ. EBIT MARGIN STRONG ASSETS & BALANCE SHEET OMNICHANNEL INFRASTRUCTURE THE RIGHT TEAM & RESOURCES A CLEAR PLAN POSITIVE COMP SALES GLOBAL GROWTH GROSS MARGIN EXPANSION OPEX LEVERAGE
Slide 116: Our Values
OUR VALUES Niteeeem NE ; N23 aLways
Slide 117: Human; A&F Co. Gives Back
HUMAN her ect willl, Sossene va = oe A A A&E Co. <<. — GIVES BACK seriousfury children’s network founded by paul newman A
Slide 118: Q & A
Q & A
Slide 119: Thank You
THANK YOU INVESTOR DAY APRIL 25, 2018 NEW YORK