Abercrombie & Fitch Company · NYSE:ANF
Abercrombie & Fitch — Q3 2018 Earnings Presentation
27 slides from Abercrombie & Fitch's earnings presentation, Nov 30, 2018
Slide 1: Investor Presentation Third Quarter 2018
INVESTOR PRESENTATION THIRD QUARTER 2018
Slide 2: Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
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 presentation or made by management or spokespeople of A&F involve risk
Slide 3: Our Journey
OUR JOURNEY STABILIZE TRANSFORM AND GROW ACCELERATE GROWTH • BUILT THE FOUNDATION • COMPARABLE SALES GROWTH • EXPAND GLOBALLY • RETURNED TO GROWTH • GROSS PROFIT RATE EXPANSION • TAKE SHARE IN THE U.S. • CENTERED AROUND THE CUSTOMER • LEVERAGE EXPENSES • DEVELOP PLAYBOOKS TO ALIGN PRODUCT, VOICE & E
Slide 4: Our Transformation Initiatives Continued
OUR TRANSFORMATION INITIATIVES CONTINUED GLOBAL STORE NETWORK OPTIMIZATION • RIGHTSIZING STORE FLEET AND ADAPTING TO THE EVOLVING ROLE OF THE STORE AS CUSTOMERS' SHOPPING PREFERENCES SHIFT ENHANCING DIGITAL AND OMNICHANNEL CAPABILITIES • CREATING BEST-IN-CLASS CUSTOMER EXPERIENCES WHILE GROWING PROF
Slide 5: Our Fiscal 2020 Targets
OUR FISCAL 2020 TARGETS LOW SINGLE-DIGIT SALES CAGR • POSITIVE COMPARABLE SALES • GLOBAL MARKET EXPANSION DOUBLE FISCAL 2017 ADJUSTED NON-GAAP EBIT MARGIN OF 2.9% • MODEST GROSS PROFIT RATE EXPANSION • OPERATING EXPENSE LEVERAGE 5
Slide 6: Q3 2018 CEO Commentary
Q3 2018 CEO COMMENTARY "We are pleased with our third quarter performance, our fifth consecutive quarter of positive comparable sales, with growth across both of our brands. We delivered 3% comparable sales growth on top of 4% last year, with continued gross profit rate stabilization. Our strong U.S
Slide 7: Q3 P&L Summary
Q3 P&L SUMMARY % OF NET % OF NET 2018 SALES 2017 SALES NET SALES $861,194 100.0% $859,112 100.0% GROSS PROFIT 527,819 61.3% 526,627 61.3% OPERATING EXPENSE 489,696 56.9% 503,957 58.7% OTHER OPERATING INCOME, NET (1,557) (0.2)% (70) 0.0% OPERATING INCOME 39,680 4.6% 22,740 2.6% INTEREST EXPENSE, NET
Slide 8: Q3 Adjusted P&L Summary
Q3 ADJUSTED P&L SUMMARY* % OF NET % OF NET 2018 SALES 2017 SALES NET SALES $861,194 100.0% $859,112 100.0% GROSS PROFIT 527,819 61.3% 526,627 61.3% OPERATING EXPENSE 492,701 57.2% 489,407 57.0% OTHER OPERATING INCOME, NET (1,557) (0.2)% (70) 0.0% OPERATING INCOME 36,675 4.3% 37,290 4.3% INTEREST EXP
Slide 9: Q3 Adjusted Non-GAAP Reconciliation
Q3 ADJUSTED NON-GAAP RECONCILIATION 2018 EXCLUDED 2018 GAAP ITEMS NON-GAAP MARKETING, GENERAL & ADMINISTRATION (1) $117,181 $(3,005) $120,186 OPERATING INCOME 39,680 3,005 36,675 INCOME BEFORE INCOME TAXES 36,823 3,005 33,818 INCOME TAX EXPENSE (3) 12,047 1,469 10,578 NET INCOME $23,919 $1,536 $22,3
Slide 10: Q3 Net Sales Increased to $861M
Q3 NET SALES INCREASED TO $861M YTD DESPITE ADVERSE IMPACTS FROM THE CALENDAR SHIFT AND CHANGES IN FOREIGN CURRENCY ABERCROMBIE BRAND ABE40.9%RCRO MBIE 40.2% HOLLISTER ABERCROMBIE HOHOLLISTERLLISTER C CO.O. $515M $346M 59.1%59. 8% • 59.8% OF TOTAL NET SALES • 40.2% OF TOTAL NET SALES • NET SALES UP
Slide 11: Q3 Comparable Sales Up 3%
Q3 COMPARABLE SALES UP 3%* YTD EXCLUDING ADVERSE IMPACTS FROM THE CALENDAR SHIFT AND CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ABERCROMBIE ABE40.9%RCRO MBIE 40.2% HOHOLLISTERLLISTER C CO.O. 59.1%59. 8% 4% 6% -3% HOLLISTER INTERNATIONAL UNITED STATES INTERNATIONAL ABERCROMBIE 40.2% 36.6% 1% ABERCROM
Slide 12: Q3 Operating Expense
Q3 OPERATING EXPENSE GAAP % OF NET GAAP % OF NET 2018 SALES 2017 SALES Δ bps (3) STORE OCCUPANCY (1) $154,593 18.0% $165,911 19.3% (130) ALL OTHER (2) 217,266 25.2% 210,033 24.4% 80 STORES AND DISTRIBUTION 371,859 43.2% 375,944 43.8% (60) MARKETING, GENERAL & ADMINISTRATIVE 117,181 13.6% 124,533 14.
Slide 13: Share Repurchases and Dividends
SHARE REPURCHASES AND DIVIDENDS SHARE REPURCHASES NUMBER OF AVERAGE SHARES COST COST DIVIDENDS TOTAL Q1 2018 778.2 $18,670 $23.99 $13,642 $32,312 Q2 2018 969.1 25,000 25.80 13,554 38,554 Q3 2018 1,184.5 25,000 21.11 13,354 38,354 YEAR TO DATE 2018 2,931.7 $68,670 $23.42 $40,550 $109,220 SHARE REPURC
Slide 14: Stores Globally as of Q3 2018
879 STORES GLOBALLY AS OF Q3 2018 EXCLUDING 14 INTERNATIONAL FRANCHISE STORES ACROSS BRANDS 120 18 CANADA EUROPE 684 9 48 UNITED STATES MIDDLE EAST ASIA 547 HOLLISTER 332 ABERCROMBIE 14
Slide 15: Q3 Store Count Activity
Q3 STORE COUNT ACTIVITY UNITED MIDDLE TOTAL COMPANY TOTAL STATES CANADA EUROPE ASIA EAST END OF Q2 2018 870 679 18 117 47 9 OPENINGS 11 7 — 3 1 — CLOSINGS (2) (2) — — — — END OF Q3 2018 879 684 18 120 48 9 HOLLISTER (1) END OF Q2 2018 540 396 11 100 28 5 OPENINGS 7 4 — 2 1 — CLOSINGS — — — — — — END
Slide 16: Q3 New Store Openings
Q3 NEW STORE OPENINGS BRAND CENTER CITY DATE DIVER CITY TOKYO, JAPAN 8/31/2018 SANTA ROSA SANTA ROSA, CALIFORNIA 9/14/2018 MALL AT UNIVERSITY TOWN CENTER SARASOTA, FLORIDA 9/14/2018 HOLLISTER SPRINGFIELD TOWN CENTER ALEXANDRIA, VIRGINIA 10/12/2018 GREEN ACRES VALLEY STREAM, NEW YORK 10/12/2018 OLYMP
Slide 17: Store Optimization Activity
STORE OPTIMIZATION ACTIVITY Q3 2018 HOLLISTER ABERCROMBIE (1) TOTAL COMPANY NEW STORES 7 4 11 REMODELS 11 1 12 RIGHT-SIZES 1 4 5 TOTAL NEW EXPERIENCES 19 9 28 STORE CLOSURES — (2) (2) YEAR TO DATE 2018 HOLLISTER ABERCROMBIE (1) TOTAL COMPANY NEW STORES 9 7 16 REMODELS 25 1 26 RIGHT-SIZES 5 8 13 TOTA
Slide 18: Full Year Store Optimization Outlook
FULL YEAR STORE OPTIMIZATION OUTLOOK WE PLAN TO DELIVER APPROXIMATELY 70 ENGAGING NEW CUSTOMER EXPERIENCES IN FISCAL 2018 THROUGH PROTOTYPES, NEW STORE FORMATS AND REMODELS WHILE ALSO RIGHT-SIZING OR CLOSING SOME OF OUR LESS PRODUCTIVE STORES. HOLLISTER ABERCROMBIE (1) TOTAL COMPANY NEW STORES 13 9
Slide 19: Q4 2018 Outlook
Q4 2018 OUTLOOK OUTLOOK NET SALES (1) DOWN MID SINGLE DIGITS CALENDAR SHIFT & LOSS OF FISCAL 2017'S 53RD WEEK $60M ADVERSE IMPACT TO NET SALES CHANGES IN FOREIGN CURRENCY $15M ADVERSE IMPACT TO NET SALES COMPARABLE SALES (2) UP LOW SINGLE DIGITS GROSS PROFIT RATE (3) FLAT TO UP SLIGHTLY GAAP OPERATI
Slide 20: Full Year 2018 Outlook
FULL YEAR 2018 OUTLOOK PREVIOUS OUTLOOK CURRENT OUTLOOK NET SALES (1) UP 2% TO 4% * LOSS OF FISCAL 2017'S 53RD WEEK $40M ADVERSE IMPACT TO NET SALES * CHANGES IN FOREIGN CURRENCY $20M BENEFIT TO NET SALES $10M BENEFIT TO NET SALES COMPARABLE SALES (2) UP 2% TO 4% * GROSS PROFIT RATE (3) UP SLIGHTLY
Slide 21: Appendix
Abercromb ARE | a | | pity hiley & Fitch Co. APPENDIX
Slide 22: Marketing Initiatives
MARKETING INITIATIVES WON BILLBOARD LIVE MUSIC AWARD FOR COLLABORATION WITH KHALID ABERCROMBIE LAUNCHED FULLY INTEGRATED MARKETING CAMPAIGN FOR KEY 22 OUTERWEAR PRODUCT, THE ULTRA COAT ABERCROMBIE KIDS ANNOUNCED PARTNERSHIP WITH GIULIANA RANCIC
Slide 23: Continuing to Expand Gilly Hicks Globally
CONTINUING TO EXPAND GILLY HICKS GLOBALLY THROUGH THE ROLLOUT OF CARVEOUTS, SIDE-BY-SIDE STORES AND LAUNCHING THE BRAND ON ALIBABA'S TMALL 23
Slide 24: Rolling Out Side-by-Side Concept Stores
ROLLING OUT SIDE-BY-SIDE CONCEPT STORES RECENT GILLY HICKS CARVEOUTS INCLUDE: Easton Town Center in Columbus, Ohio Glendale Galleria in Glendale, California Diver City in Tokyo, Japan Ernst August Galerie in Hanover, Germany International APM in Shanghai, China 24 CONTINUING TO REMODEL & OPEN NEW ST
Slide 25: Abercrombie Kids Prototype Stores
ABERCROMBIE KIDS CREATING ENGAGING EXPERIENCES THROUGH PROTOTYPE STORES WITH THE MOST RECENT OPENING AT EASTON TOWN CENTER IN COLUMBUS, OHIO 25
Slide 26: Developing a Local Customer Base Internationally
DEVELOPING A LOCAL CUSTOMER BASE INTERNATIONALLY BY LEVERAGING OUR GROWING LOYALTY PROGRAMS AND OPENING SMALLER, MALL-BASED PROTOTYPE STORES IN EUROPE, INCLUDING OUR NEW STORE IN MANCHESTER WHICH OPENED DURING THE THIRD QUARTER 26
Slide 27: Abercrombie & Fitch Co.
ARF | aBt | MO | 945 hile Abercrombie & Fitch Co. Abercrombie | abercrombie HOLLISTER | pit belay