Abercrombie & Fitch Company · NYSE:ANF
Abercrombie & Fitch — Q2 2020 Earnings Presentation
34 slides from Abercrombie & Fitch's earnings presentation, Aug 28, 2020
Slide 1: Investor Presentation: Second Quarter 2020
INVESTOR PRESENTATION: SECOND QUARTER 2020
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: Table of Contents
TABLE OF CONTENTS Safe Harbor and Other Information 2 Company Overview 4 Response to COVID-19 7 Q2 2020 Results 12 Financial Position, Liquidity & Capital Allocation 18 Global Store Network Optimization 24 Outlook 29 Appendix 31 3
Slide 4: Abercrombie & Fitch Co.
Abercrombie & Fitch Co.
Slide 5: Company Overview: Iconic Brands
COMPANY OVERVIEW ICONIC BRANDS HOLLISTER ABERCROMBIE & FITCH ABERCROMBIE KIDS The quintessential apparel brand of the global teen Abercrombie & Fitch believes that every day should A global specialty retailer of quality, comfortable, consumer, Hollister Co. believes in liberating the feel as excepti
Slide 6: Company Overview: Global, Omnichannel Retailer
COMPANY OVERVIEW GLOBAL, OMNICHANNEL RETAILER THE COMPANY'S PRODUCTS ARE SOLD GLOBALLY, PRIMARILY THROUGH ITS COMPANY-OWNED STORE AND DIGITAL CHANNELS, AS WELL AS THROUGH VARIOUS THIRD-PARTY WHOLESALE, FRANCHISE AND LICENSING ARRANGEMENTS CAPABILITY TO SHIP COMPANY-OPERATED MERCHANDISE TO ROUGHLY 85
Slide 7: Response to COVID-19
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Slide 8: Response to COVID-19: Previously-Stated Transformation Initiatives
RESPONSE TO COVID-19 OUR PREVIOUSLY-STATED TRANSFORMATION INITIATIVES THE FOLLOWING TRANSFORMATION INITIATIVES HAVE CREATED THE FOUNDATION TO ALLOW US TO QUICKLY RESPOND TO COVID-19: 1 OPTIMIZING OUR GLOBAL STORE NETWORK • Rightsizing store fleet and adapting to the evolving role of the store as cus
Slide 9: Response to COVID-19: How We Are Navigating COVID-19
RESPONSE TO COVID-19 HOW WE ARE NAVIGATING COVID-19 FOCUSING ON THE WELL-BEING OF ASSOCIATES AND CUSTOMERS • Requiring associates to use face coverings, depending on geographic region • Encouraging or requiring customers to use face coverings, depending on geographic region • Conducting associate we
Slide 10: Response to COVID-19: Pivoting Marketing and Updating Messaging
RESPONSE TO COVID-19 PIVOTING MARKETING AND UPDATING MESSAGING In response to the rapidly evolving global environment, the company quickly adapted to the challenges presented by COVID-19 and pivoted its marketing and messaging to engage with customers in meaningful, authentic and relatable ways thro
Slide 11: Response to COVID-19: 89% of Store Fleet Currently Open
RESPONSE TO COVID-19 758 STORES, 89% OF STORE FLEET, CURRENTLY OPEN* We continue to reopen stores temporarily closed in response to COVID-19 on a rolling basis, with new processes in place to promote a safe shopping environment for our associates and customers as described on slide 9. We plan to fol
Slide 12: Q2 2020 Results
Q2 2020 RESULTS 12
Slide 13: Q2 2020 Results: CEO Commentary
Q2 2020 RESULTS CEO COMMENTARY “We are listening, learning and evolving, and staying nimble in this unprecedented period of turmoil and uncertainty. Since the start of the pandemic, our global teams have been tirelessly at work, rapidly pivoting in response to the changing environment due to COVID-1
Slide 14: Net Income (Loss) per Share and Significant Items Impacting Q2 2020 Results
Q2 2020 RESULTS NET INCOME (LOSS) PER SHARE SIGNIFICANT ITEMS IMPACTING Q2 2020 RESULTS • Net sales decreased 17%, or $143M, as compared to last year, driven by the adverse impact of COVID-19 on store sales • Asset impairment charges of $8M adversely impacted results by $0.15 per diluted share, net
Slide 15: Net Sales: Total Company Down 17% to $698M
Q2 2020 RESULTS NET SALES TOTAL COMPANY NET SALES DOWN 17% TO $698M YEAR-OVER-YEAR DIGITAL SALES GROWTH OF APPROXIMATELY 56% HOLLISTER ABERCROMBIE $429M $269M DOWN 15% TO LAST YEAR DOWN 20% LAST YEAR 61.5% OF TOTAL NET SALES 38.5% OF TOTAL NET SALES UNITED STATES EMEA APAC OTHER $459M $171M $42M $27
Slide 16: Operating Expense
Q2 2020 RESULTS OPERATING EXPENSE GAAP % OF % OF (in thousands) Q2 2020 NET SALES Q2 2019 NET SALES Δ BPS (3) STORE OCCUPANCY (1) $126,733 18.1% $152,581 18.1% — ALL OTHER (2) 183,637 26.3% 223,766 26.6% (30) STORES AND DISTRIBUTION 310,370 44.4% 376,347 44.7% (30) MARKETING, GENERAL & ADMINISTRATIV
Slide 17: Income Statement
Q2 2020 RESULTS INCOME STATEMENT GAAP NON-GAAP* % OF % OF % OF % OF (in thousands) Q2 2020 NET SALES Q2 2019 NET SALES Q2 2020 NET SALES Q2 2019 NET SALES NET SALES $698,328 100.0% $841,078 100.0% $698,328 100.0% $841,078 100.0% (1) GROSS PROFIT 423,608 60.7% 498,633 59.3% 423,608 60.7% 498,633 59.3
Slide 18: Financial Position, Liquidity & Capital Allocation
FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION 18
Slide 19: Financial Position and Liquidity Summary
FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION FINANCIAL POSITION AND LIQUIDITY SUMMARY LIQUIDITY* $1,100M $1,061M CASH & EQUIVALENTS $767M AS COMPARED TO $500M LAST YEAR $1,000M SHORT-TERM BORROWINGS NO BORROWINGS OUTSTANDING UNDER ABL FACILITY $914M $295M OF BORROWING AVAILABLE UNDER ABL FACIL
Slide 20: Cash Flow Summary
FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION CASH FLOW SUMMARY YEAR TO DATE PERIOD ENDED (in thousands) AUGUST 1, 2020 AUGUST 3, 2019 NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES $96,233 $(36,055) NET CASH USED FOR INVESTING ACTIVITIES $(75,621) $(94,224) NET CASH PROVIDED BY (USED FOR
Slide 21: Share Repurchases and Dividends
FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION SHARE REPURCHASES AND DIVIDENDS In order to preserve liquidity and increase financial flexibility in light of COVID-19, during fiscal 2020 the company temporarily suspended its share repurchase and dividend programs. At the end of Q2 2020, the Compa
Slide 22: Balance Sheet
FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION BALANCE SHEET (in thousandths) AUGUST 1, 2020 FEBRUARY 1, 2020 AUGUST 3, 2019 CASH AND EQUIVALENTS $766,721 $671,267 $499,757 RECEIVABLES 88,323 80,251 98,691 INVENTORIES 453,239 434,326 487,109 OTHER CURRENT ASSETS 75,160 78,905 86,586 TOTAL CURREN
Slide 23: Statement of Cash Flows
FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION STATEMENT OF CASH FLOWS YEAR TO DATE PERIOD ENDED (in thousandths) AUGUST 1, 2020 AUGUST 3, 2019 NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES $96,233 $(36,055) PURCHASES OF PROPERTY AND EQUIPMENT (75,621) (94,224) NET CASH USED FOR INVESTING
Slide 24: Global Store Network Optimization
GLOBAL STORE NETWORK OPTIMIZATION 24
Slide 25: Stores as of Q2 2020: New Store Openings & Closings
GLOBAL STORE NETWORK OPTIMIZATION 850 STORES AS OF Q2 2020 NEW STORE OPENINGS & CLOSINGS UNITED TOTAL COMPANY TOTAL STATES CANADA EUROPE ASIA MIDDLE EAST END OF Q1 2020 849 643 17 129 49 11 OPENINGS 7 2 — 4 — 1 PERMANENT CLOSINGS (6) (6) — — — — END OF Q2 2020 850 639 17 133 49 12 UNITED HOLLISTER (
Slide 26: Gross Square Footage Reduced 14% Since 2015
GLOBAL STORE NETWORK OPTIMIZATION GROSS SQUARE FOOTAGE REDUCED 14% SINCE 2015 HOLLISTER ABERCROMBIE TOTAL COMPANY (in thousands) U.S. INTERNATIONAL U.S. INTERNATIONAL U.S. INTERNATIONAL TOTAL FY 2015 2,856 1,183 2,634 619 5,490 1,802 7,292 FY 2016 2,737 1,218 2,411 641 5,148 1,859 7,007 (4)% 3% (8)%
Slide 27: Store Fleet Detail: 42% of Global Fleet in Updated Formats
GLOBAL STORE NETWORK OPTIMIZATION STORE FLEET DETAIL 42% OF GLOBAL FLEET IN UPDATED FORMATS Q2 2020 STORE OPTIMIZATION ACTIVITY 898 HOLLISTER ABERCROMBIE TOTAL 900 868 861 854 850 NEW STORES 3 4 7 800 REMODELS 2 — 2 700 661 RIGHT-SIZES 3 2 5 588 NEW EXPERIENCES 8 6 14 600 524 STORE CLOSURES (5) (1)
Slide 28: Flagship Store Fleet
GLOBAL STORE NETWORK OPTIMIZATION FLAGSHIP STORE FLEET FLAGSHIP NATURAL LEASE EXPIRATION CADENCE (2) 8 8 7 P&L IMPACT OF FLAGSHIP STORES Entered fiscal 2019 with 15 flagships after closing five flagship locations since 6 fiscal 2017. 5 The combined 4-wall operating margin of the 15 flagships remaini
Slide 29: Abercrombie & Fitch Co.
& Fitch Co. A&E | a&f | wO | Gilly Hike
Slide 30: Fiscal 2020 Outlook
OUTLOOK FISCAL 2020 OUTLOOK The company has seen, and expects to continue to see, material adverse impacts as a result of COVID-19. As a result, for the third quarter of fiscal 2020, the company expects net sales to be down in the range of 15% to 20% as compared to last year. The company also expect
Slide 31: Appendix
APPENDIX 31
Slide 32: Reconciliation of GAAP to Non-GAAP Results
APPENDIX RECONCILIATION OF GAAP TO NON-GAAP RESULTS Q2 2020 EXCLUDED Q2 2020 GAAP ITEMS NON-GAAP ASSET IMPAIRMENT, EXCLUSIVE OF FLAGSHIP STORE $8,083 $8,083 $— EXIT CHARGES OPERATING INCOME 14,143 (8,083) 22,226 INCOME BEFORE INCOME TAXES 7,045 (8,083) 15,128 INCOME TAX EXPENSE (1) 1,253 1,166 87 NE
Slide 33: Reconciliation of GAAP to Non-GAAP Results
APPENDIX RECONCILIATION OF GAAP TO NON-GAAP RESULTS NET SALES Q2 2020 Q2 2019 Δ % GAAP $698,328 $841,078 (17)% IMPACT FROM CHANGES IN FOREIGN CURRENCY EXCHANGE RATES (1) — (2,125) 0% NON-GAAP CONSTANT CURRENCY BASIS $698,328 $838,953 (17)% GROSS PROFIT Q2 2020 Q2 2019 Δ BPS (2) GAAP $423,608 $498,63
Slide 34: Abercrombie & Fitch Co.
Abercrombie & Fitch Co. ARF | a&E | i | pity hidey . . ah” Apr | SPeragmPie | HOLLISTER | ily Hate