Abercrombie & Fitch Company · NYSE:ANF
Abercrombie & Fitch — Q2 2022 Earnings Presentation
34 slides from Abercrombie & Fitch's earnings presentation, Aug 29, 2022
Slide 1: Investor Presentation: Second Quarter 2022
INVESTOR PRESENTATION: SECOND QUARTER 2022
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 This presentation and related statements by management or spokespeople of A&F contain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These statements, inclu
Slide 3: Table of Contents
Safe Harbor and Other Information 2 Company Overview 4 Focus Areas 11 Q2 2022 Results 16 Updated Fiscal 2022 Outlook 24 Financial Position, Liquidity & Capital Allocation 26 Appendix 31 TABLE OF CONTENTS 3
Slide 4: Company Overview
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Slide 5: Abercrombie & Fitch Co. company overview
Abercrombie & Fitch Co. is a global, digitally-led, omni-channel apparel and accessories retailer catering to kids through millennials with assortments curated for their specific lifestyle needs Our corporate purpose of 'Being here for you on the journey to being and becoming who you are' fuels our
Slide 6: Global brands: Hollister, Gilly Hicks, abercrombie kids
The quintessential apparel brand of the global teen consumer, Hollister Co. believes in liberating the spirit of an endless summer inside everyone. At Hollister, summer isn’t just a season, it’s a state of mind. Hollister creates carefree style designed to make all teens feel celebrated and comforta
Slide 7: Global, digitally-led omnichannel retailer
29% ~90% 734 GLOBAL, DIGITALLY-LED OMNICHANNEL RETAILER COMPANY-OPERATED RETAIL STORES CAPABILITY TO SHIP TO OVER 110 COUNTRIES GLOBAL BRANDS WHOLESALE PARTNERSHIPS, PRIMARILY INTERNATIONAL OF GLOBAL STORE FLEET WITH SHIP- FROM-STORE AND PURCHASE-ONLINE- PICK-UP-IN-STORE CAPABILITIES OF FISCAL 2021
Slide 8: Abercrombie & Fitch Co.
Abercrombie & Fitch Co.
Slide 9: Always Forward Plan and 2025 targets
ALWAYS FORWARD PLAN EXECUTE FOCUSED BRAND GROWTH PLANS •data driven approach to store expansion •grow brand lovers through digital marketing and social selling ACCELERATE AN ENTERPRISE-WIDE DIGITAL REVOLUTION • "Know Them Better" - continued expansion and acceleration of investments in customer anal
Slide 10: 10
10
Slide 11: 2022 Focus Areas
2022 FOCUS AREAS 11
Slide 12: Focus areas for fiscal 2022
The following focus areas for fiscal 2022 serve as a framework to the company achieving sustainable growth and progressing toward the 2025 Always Forward Plan targets OUR FOCUS AREAS FOR 2022 • Execute brand growth plans, primarily focused on continuing momentum at Abercrombie & Fitch and delivering
Slide 13: Investing to be a best-in-class digitally-led omni-channel retailer
AGGRESSIVELY INVESTING TO BE A BEST-IN-CLASS DIGITALLY-LED GLOBAL OMNI-CHANNEL RETAILER * In fiscal 2021, the company was impacted by the COVID-19 pandemic and experienced widespread temporary store closures, while the company’s digital operations continued to serve the customers during this unprece
Slide 14: Net store openings expected in 2022 with flat square footage
EXPECT TO SEE NET STORE OPENINGS IN 2022 WHILE MAINTAINING ROUGHLY FLAT SQUARE FOOTAGE 861 857 735 729 734 Total stores FY18 FY19 FY20 FY21 Q2 22 GROSS SQUARE FOOTAGE (in thousands) FY 18 FY 19 FY 20 FY 21 Q2 22 6,566 6,314 5,232 5,052 5,059 14
Slide 15: Global fleet well-positioned; 91% of U.S. stores in A/B malls
GLOBAL FLEET WELL-POSITIONED; 91% OF U.S. STORES LOCATED IN A/B MALLS * Mall rating based on Green Street Advisors as of April 2022. YTD STORE ACTIVITY Q2 2022 STORE FLEET DETAIL HOLLISTER ABERCROMBIE TOTAL COMPANY # OF STORES % OF FLEET # OF STORES % OF FLEET # OF STORES % OF FLEET LEGACY STORES 18
Slide 16: Q2 2022 Results
Q2 2022 RESULTS 16
Slide 17: CEO Commentary
CEO COMMENTARY “As the global macro environment deteriorated in the second quarter, we experienced a divergence in brand performance. Abercrombie delivered its highest Q2 sales since 2015 and its ninth consecutive quarter of average unit retail (“AUR”) growth. This was more than offset by Hollister,
Slide 18: Significant items impacting Q2 2022 results
NET (LOSS) INCOME PER SHARE SIGNIFICANT ITEMS IMPACTING Q2 2022 RESULTS • Net sales decreased 7%, or $60M, as compared to last year. • Gross margin rate declined 730 basis points as compared to last year to 57.9%, driven by higher product costs and commodity inflation partially offset by higher aver
Slide 19: Net sales down 7% compared to Q2 2021
TOTAL COMPANY NET SALES DOWN 7% COMPARED TO Q2 2021, TO $805M ABERCROMBIE $368M UP 5% TO LAST YEAR 45.7% OF TOTAL NET SALES HOLLISTER $437M DOWN 15% TO LAST YEAR 54.3% OF TOTAL NET SALES EMEA $167M DOWN 13% TO LAST YEAR 20.7% OF TOTAL NET SALES UNITED STATES (1) $578M DOWN 4% TO LAST YEAR 71.8% OF T
Slide 20: Reconciliation of GAAP to non-GAAP operating expense
(in thousands) Q2 2022 % OF NET SALES Q2 2021 % OF NET SALES 1 YR Δ BPS (3) STORE OCCUPANCY (1) $103,191 12.8% $107,277 12.4% 40 ALL OTHER (2) 237,600 29.5% 218,570 25.3% 420 STORES AND DISTRIBUTION 340,791 42.3% 325,847 37.7% 460 MARKETING, GENERAL & ADMINISTRATIVE 124,168 15.4% 123,913 14.3% 110 A
Slide 21: Income statement
INCOME STATEMENT (1) Gross profit is derived from cost of sales, exclusive of depreciation and amortization. (2) Gross profit rate of 57.9% is down 730 basis points as compared to last year, primarily driven higher product costs and the adverse impact of exchange rates, partially offset by higher AU
Slide 22: Balance sheet
BALANCE SHEET (in thousands) JULY 30, 2022 JANUARY 29, 2022 JULY 31, 2021 CASH AND EQUIVALENTS $369,957 $823,139 $921,504 RECEIVABLES 79,820 69,102 87,151 INVENTORIES 708,024 525,864 415,604 OTHER CURRENT ASSETS 104,887 89,654 77,392 TOTAL CURRENT ASSETS $1,262,688 $1,507,759 $1,501,651 PROPERTY AND
Slide 23: Statement of cash flows
YEAR TO DATE PERIOD ENDED (in thousands) JULY 30, 2022 JULY 31, 2021 NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES $(259,733) $49,945 PURCHASES OF PROPERTY AND EQUIPMENT (59,582) (35,269) PROCEEDS FROM THE SALE OF PROPERTY AND EQUIPMENT 7,972 — NET CASH USED FOR INVESTING ACTIVITIES $(51,610)
Slide 24: Updated Fiscal 2022 Outlook
24 UPDATED FISCAL 2022 OUTLOOK 24
Slide 25: Updated fiscal 2022 outlook
PREVIOUS FULL YEAR OUTLOOK (1) CURRENT FULL YEAR OUTLOOK NET SALES IN THE RANGE OF FLAT TO UP 2%(2) DOWN MID-SINGLE DIGITS(2) OPERATING MARGIN IN THE RANGE OF 5% TO 6% IN THE RANGE OF 1% TO 3%(3) EFFECTIVE TAX RATE MID 30s NA(4) CURRENT Q3 OUTLOOK NET SALES DOWN HIGH-SINGLE DIGITS(5) OPERATING INCOM
Slide 26: Financial Position, Liquidity & Capital Allocation
FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION 26
Slide 27: Strong financial position and liquidity
STRONG FINANCIAL POSITION AND LIQUIDITY CASH & EQUIVALENTS $370M AS COMPARED TO $922M LAST YEAR, AS COMPANY BROUGHT IN INVENTORY EARLIER THAN 2021 AND UTILIZED EXCESS CASH TO FUND SHARE REPURCHASES SHORT-TERM BORROWINGS NO BORROWINGS OUTSTANDING UNDER ABL FACILITY $359M OF BORROWING AVAILABLE UNDER
Slide 28: Total company inventory up 70% compared to Q2 2021
TOTAL COMPANY INVENTORY UP 70% COMPARED TO Q2 2021, TO $708 MILLION TOTAL +70% TO 2021 2021 INVENTORY AT COST REPRESENTED THE LOWEST Q2 LEVEL IN OVER A DECADE UNITS ON HAND 28% contribution 2021 UNITS ON HAND LOWEST SINCE MID-2000s INVENTORY FLOWS PLANNED EARLIER THAN 2021 IN-TRANSIT (1) 34% contrib
Slide 29: Cash flow summary
(in thousands) NET CASH PROVIDED BY OPERATING ACTIVITIES CAPITAL EXPENDITURES FREE CASH FLOW (1) FY 2017 $287,658 $107,001 $180,657 FY 2018 $352,933 $152,393 $200,540 FY 2019 $300,685 $202,784 $97,901 FY 2020 $404,918 $101,910 $303,008 FY 2021 $277,782 $96,979 $180,803 (1) Free cash flow is a non-GA
Slide 30: Share repurchases and dividends
THE COMPANY REPURCHASED APPROXIMATELY 4.3 MILLION SHARES AND HAS RETURNED $118 MILLION TO SHAREHOLDERS DURING THE YEAR-TO-DATE PERIOD ENDED JULY 30, 2022 SHARE REPURCHASES (in thousands, except for average cost) NUMBER OF SHARES COST AVERAGE COST DIVIDENDS TOTAL FY 2017 — $— $— $54,392 $54,392 FY 20
Slide 31: Appendix
APPENDIX 31
Slide 32: GAAP to non-GAAP reconciliation
(1) The tax effect of excluded items, calculated as the difference between the tax provision on a GAAP basis and an adjusted non-GAAP basis. (in thousands) Q2 2022 GAAP EXCLUDED ITEMS Q2 2022 NON-GAAP ASSET IMPAIRMENT, EXCLUSIVE OF FLAGSHIP STORE EXIT CHARGES $2,170 $2,170 $— OPERATING LOSS (2,191)
Slide 33: Constant currency reconciliation
NET SALES Q2 2022 Q2 2021 Δ % GAAP $805,091 $864,850 (7)% IMPACT FROM CHANGES IN FOREIGN CURRENCY EXCHANGE RATES (1) — (23,124) 3% NON-GAAP CONSTANT CURRENCY BASIS $805,091 $841,726 (4)% GROSS PROFIT Q2 2022 Q2 2021 Δ BPS (2) GAAP $465,891 $563,485 (730) IMPACT FROM CHANGES IN FOREIGN CURRENCY EXCHA
Slide 34: Abercrombie & Fitch Co.
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