Abercrombie & Fitch Company · NYSE:ANF
Abercrombie & Fitch — Q2 2021 Earnings Presentation
33 slides from Abercrombie & Fitch's earnings presentation, Aug 27, 2021
Slide 1: Investor Presentation: Second Quarter 2021
INVESTOR PRESENTATION: SECOND QUARTER 2021
Slide 2: Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
2 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 ri
Slide 3: Table of Contents
3 TABLE OF CONTENTS Safe Harbor and Other Information 2 Company Overview 4 Focus Areas 7 Digital Evolution 13 Global Store Network Optimization 15 Q2 2021 Results 18 Financial Position, Liquidity & Capital Allocation 24 Appendix 30
Slide 4: Company Overview
4 COMPANY OVERVIEW
Slide 5: Gilly Hicks, Social Tourist and Hollister brands
5 GILLY HICKS Hollister also carries an intimates brand, Gilly Hicks. At Gilly Hicks, we know everyone has their own unique happy place. We exist to help you find yours. Gilly Hicks is an underwear, activewear and loungewear brand designed to give all Gen Z customers their daily dose of happy. SOCIA
Slide 6: Global, Digitally-Led Omnichannel Retailer
6 COMPANY-OPERATED RETAIL STORES COMPANY OVERVIEW GLOBAL, DIGITALLY-LED OMNICHANNEL RETAILER THE COMPANY'S PRODUCTS ARE SOLD GLOBALLY, PRIMARILY THROUGH ITS COMPANY-OWNED DIGITAL AND STORE CHANNELS, AS WELL AS THROUGH VARIOUS THIRD-PARTY ARRANGEMENTS 23 CAPABILITY TO SHIP TO OVER 110 COUNTRIES INTER
Slide 7: Focus Areas
/ FOCUS AREAS! ¥
Slide 8: Transformation initiatives
8 OPTIMIZING OUR GLOBAL STORE NETWORK • 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 profitably across channels INCREASING THE
Slide 9: Our Focus Areas for 2021
9 ACCELERATING DIGITAL, DATA AND TECHNOLOGY INVESTMENTS TO INCREASE AGILITY AND IMPROVE CUSTOMER EXPERIENCE INCREASING OUR MARKETING INVESTMENTS TO BUILD ON THE MOMENTUM WE SEE ACROSS BRANDS AND GEOGRAPHIES DEDICATING RESOURCES TOWARDS CONTINUING GILLY HICKS GROWTH AND LAUNCHING SOCIAL TOURIST OPTIM
Slide 10: Gilly Hicks Brand Evolution
10 FOCUS AREAS GILLY HICKS BRAND EVOLUTION THE COMPANY RECENTLY ANNOUNCED STEPS IN ITS GROWTH STRATEGY INCLUDING A NEW MORE GENDER-INCLUSIVE ASSORTMENT EXPANDED PRODUCT ASSORTMENT, A NEW STORE PROTOTYPE AND DIGITAL EXPERIENCE, AND A REIMAGINED BRAND PURPOSE ANNOUNCED: July 15, 2021 BRAND PURPOSE: Gi
Slide 11: Customer Reaction to Gilly Hicks Relaunch Has Been Positive
11 FOCUS AREAS CUSTOMER REACTION TO GILLY HICKS RELAUNCH HAS BEEN POSITIVE During Q2 2021, the company opened the first Gilly Hicks standalone store concept at Easton Town Center in Columbus, OH and introduced updated side-by-side with Hollister store experiences, including 20 refreshes to existing
Slide 12: How We Are Navigating COVID-19
12 FOCUS AREAS HOW WE ARE NAVIGATING COVID-19 FOCUSING ON THE WELL-BEING OF ASSOCIATES AND CUSTOMERS Implemented a range of health and safety measures with the well-being of the Company’s customers, associates and business partners in mind, including but not limited to ensuring all stores follow loc
Slide 13: Digital Evolution
apt ey | aX : DIGITAL EVOLUTION |
Slide 14: Digital Evolution Investments
14 DIGITAL EVOLUTION INVESTMENTS TO SUPPORT TRANSFORMATION TO A DIGITALLY-LED GLOBAL OMNI-CHANNEL RETAILER * In fiscal 2020, 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
Slide 15: Global Store Network Optimization
15 GLOBAL STORE NETWORK OPTIMIZATION
Slide 16: Global Store Network Optimization
16 Total stores FY17 FY18 FY19 FY20 Q2 21 * Prior period figures have been revised to reflect a change in classification of certain stores to be consistent with current presentation. GROSS SQUARE FOOTAGE (in thousands) FY 17 FY 18 FY 19 FY 20 Q2 21 6,710 6,566 6,314 5,232 5,150 GLOBAL STORE NETWORK
Slide 17: Global Store Network Optimization: Store Fleet Detail
17* Mall rating based on Green Street Advisors as of March 2021. YTD STORE OPTIMIZATION ACTIVITY Q2 2021 STORE FLEET DETAIL HOLLISTER ABERCROMBIE TOTAL COMPANY # OF STORES % OF FLEET # OF STORES % OF FLEET # OF STORES % OF FLEET LEGACY STORES 193 38% 106 46% 299 41% UPDATED FORMATS 299 59% 78 34% 37
Slide 18: Q2 2021 Results
18 Q2 2021 RESULTS
Slide 19: Q2 2021 Management Commentary
19 “As our customers’ mindset shifted to summer, we continued to deliver on product, voice and experience. Total net sales grew 24% year-over-year, or 3% from 2019. Our largest market, the U.S., had healthy net sales growth of 31% on a one-year and 11% on a two-year basis. As customers returned to s
Slide 20: Significant Items Impacting Q2 2021 Results
20 SIGNIFICANT ITEMS IMPACTING Q2 2021 RESULTS • Net sales increased 24%, or $167M, as compared to last year, reflecting an increase in store sales as the company anniversaries prior year COVID-19 related store closures. • Gross margin rate improved 450 basis points as compared to last year to 65.2%
Slide 21: Q2 2021 Results: Net Sales
21 TOTAL COMPANY NET SALES UP 24% AND 3% COMPARED TO Q2 2020 AND Q2 2019, RESPECTIVELY, TO $865M DIGITAL SALES DOWN 3% AND UP 52% TO LAST YEAR AND 2019, RESPECTIVELY, RESULTING IN Q2 2021 DIGITAL SALES OF $376M, OR 44% OF TOTAL NET SALES ABERCROMBIE $350M UP 30% TO LAST YEAR 40.5% OF TOTAL NET SALES
Slide 22: Operating Expense
22 GAAP NON-GAAP* * Q2 non-GAAP operating expense is presented on an adjusted non-GAAP basis, and excludes the effect of certain items set out of page 31. (1) Includes operating lease costs, other landlord charges, utilities, depreciation and other occupancy expense. (2) Includes selling payroll, st
Slide 23: Q2 2021 GAAP Income Statement
23 (1) Gross profit is derived from cost of sales, exclusive of depreciation and amortization. GAAP (in thousands) Q2 2021 % OF NET SALES Q2 2020 % OF NET SALES Q2 2019 % OF NET SALES NET SALES $864,850 100.0% $698,328 100.0% $841,078 100.0% GROSS PROFIT (1) 563,485 65.2% 423,608 60.7% 498,633 59.3%
Slide 24: Financial Position, Liquidity & Capital Allocation
24 FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION
Slide 25: Financial Position and Liquidity Summary
25 CASH & EQUIVALENTS $922M AS COMPARED TO $767M LAST YEAR SHORT-TERM BORROWINGS NO BORROWINGS OUTSTANDING UNDER ABL FACILITY $249M OF BORROWING AVAILABLE UNDER ABL FACILITY AS OF JULY 31, 2021 GROSS LONG-TERM BORROWINGS $308M OUTSTANDING AS COMPARED TO $350M LAST YEAR INVENTORIES $416M DOWN 8% FROM
Slide 26: Cash Flow Summary
26 (in thousands) NET CASH PROVIDED BY OPERATING ACTIVITIES CAPITAL EXPENDITURES FREE CASH FLOW (1) FY 2016 $185,169 $140,844 $44,325 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 (1) Free cash flow is a non
Slide 27: Share Repurchases and Dividends
27 SHARE REPURCHASES (in thousands, except for average cost) NUMBER OF SHARES COST AVERAGE COST DIVIDENDS TOTAL FY 2016 — $— $— $54,066 $54,066 FY 2017 — $— $— $54,392 $54,392 FY 2018 2,932 $68,670 $23.42 $53,714 $122,384 FY 2019 3,957 $63,542 $16.06 $51,510 $115,052 FY 2020 1,397 $15,172 $10.86 $12
Slide 28: Condensed Balance Sheet
28 (in thousands) JULY 31, 2021 JANUARY 30, 2021 AUGUST 1, 2020 CASH AND EQUIVALENTS $921,504 $1,104,862 $766,721 RECEIVABLES 87,151 83,857 88,323 INVENTORIES 415,604 404,053 453,239 OTHER CURRENT ASSETS 77,392 68,857 75,160 TOTAL CURRENT ASSETS $1,501,651 $1,661,629 $1,383,443 PROPERTY AND EQUIPMEN
Slide 29: Condensed Cash Flow Statement
29 YEAR TO DATE PERIOD ENDED (in thousands) JULY 31, 2021 AUGUST 1, 2020 NET CASH PROVIDED BY OPERATING ACTIVITIES $49,945 $46,233 PURCHASES OF PROPERTY AND EQUIPMENT (35,269) (75,621) WITHDRAWAL OF FUNDS FROM RABBI TRUST ASSETS — 50,000 NET CASH USED FOR INVESTING ACTIVITIES $(35,269) $(25,621) PRO
Slide 30: Appendix
30 APPENDIX
Slide 31: Constant Currency and Non-GAAP Reconciliation
31 NET SALES Q2 2021 Q2 2020 Δ % GAAP $864,850 $698,328 24% IMPACT FROM CHANGES IN FOREIGN CURRENCY EXCHANGE RATES (1) — 16,706 (2)% NON-GAAP CONSTANT CURRENCY BASIS $864,850 $715,034 21% GROSS PROFIT Q2 2021 Q2 2020 Δ BPS (2) GAAP $563,485 $423,608 450 IMPACT FROM CHANGES IN FOREIGN CURRENCY EXCHAN
Slide 32: Excluded Items Reconciliation
32 (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 2021 GAAP EXCLUDED ITEMS Q2 2021 NON-GAAP ASSET IMPAIRMENT, EXCLUSIVE OF FLAGSHIP STORE EXIT CHARGES $786 $786 $— OPERATING INCOME 114,787
Slide 33: Abercrombie & Fitch Co.
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