Abercrombie & Fitch Company · NYSE:ANF
Abercrombie & Fitch — Q1 2020 Earnings Presentation
37 slides from Abercrombie & Fitch's earnings presentation, May 29, 2020
Slide 1: Investor Presentation: First Quarter 2020
INVESTOR PRESENTATION: FIRST 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 Q1 2020 Results 15 Financial Position, Liquidity & Capital Allocation 21 Global Store Network Optimization 27 Outlook 32 Appendix 34 3
Slide 4: ARE | a&f | a | Gilly Hoke
ARE | a&f | a | Gilly Hoke
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 MORE THAN
Slide 7: Abercrombie ARE | a8 | > | Gilly Hobe
Abercrombie ARE | a8 | > | Gilly Hobe > ad
Slide 8: Response to COVID-19: Previously-Stated Transformation Initiatives
RESPONSE TO COVID-19 OUR PREVIOUSLY-STATED TRANSFORMATION INITIATIVES THESE 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 customers'
Slide 9: Timeline of Actions Taken in Response to COVID-19
RESPONSE TO COVID-19 TIMELINE OF ACTIONS TAKEN IN RESPONSE TO COVID-19 The company announced updates to its global store operations, including The company borrowed By mid-February, the company the temporary closure of all $210M under its senior had reopened over 75% of Company-operated stores in Nor
Slide 10: Timeline of Actions Taken in Response to COVID-19 (continued)
RESPONSE TO COVID-19 TIMELINE OF ACTIONS TAKEN IN RESPONSE TO COVID-19 The company announced expense management actions to further strengthen its financial position and implementing temporary payroll The board of directors authorized the actions related to the company's store and corporate associate
Slide 11: Plans to Navigate Recent COVID-19 Challenges
RESPONSE TO COVID-19 PLANS TO NAVIGATE RECENT COVID-19 CHALLENGES FOCUSING ON THE WELL-BEING OF ASSOCIATES AND CUSTOMERS WHILE ROLLING OUT STORE REOPENINGS • Requiring associates to use face coverings and conducting associate wellness checks in accordance with local government direction • Implementi
Slide 12: 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 13: Reimagining the Store Shopping Experience
RESPONSE TO COVID-19 REIMAGINING THE STORE SHOPPING EXPERIENCE We are following guidance from government and health authorities, and complying with the requirements, to put a range of precautionary measures in place, including: • Requiring associates to use face coverings; • Encouraging or requiring
Slide 14: Stores Currently Open
RESPONSE TO COVID-19 409 STORES, 48% 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 13. We plan to fo
Slide 15: Q1 2020 Results
Q1 2020 RESULTS 15
Slide 16: CEO Commentary
Q1 2020 RESULTS CEO COMMENTARY “I am proud of our global teams’ and partners’ perseverance and swift call to action during this unprecedented period. We entered this fiscal year in a strong financial position, and in light of COVID-19 took immediate, strategic and aggressive steps to balance our sho
Slide 17: Significant Items Impacting Q1 2020 Results
Q1 2020 RESULTS NET LOSS PER SHARE SIGNIFICANT ITEMS IMPACTING Q1 2020 RESULTS • Net sales decreased 34%, or $249M, as compared to last year, creating significant operating expense deleverage driven by widespread temporary store closures across brands and regions • Charges of approximately $15M, or
Slide 18: Net Sales
Q1 2020 RESULTS NET SALES TOTAL COMPANY NET SALES DOWN 34% TO $485M NET SALES DECREASED 33% ON A CONSTANT CURRENCY BASIS OVER LAST YEAR, DRIVEN BY WIDESPREAD TEMPORARY STORE CLOSURES, PARTIALLY OFFSET BY YEAR-OVER-YEAR DIGITAL SALES GROWTH OF APPROXIMATELY 25% HOLLISTER ABERCROMBIE $273M $212M DOWN
Slide 19: Operating Expense
Q1 2020 RESULTS OPERATING EXPENSE GAAP % OF % OF (in thousands) Q1 2020 NET SALES Q1 2019 NET SALES Δ BPS (3) STORE OCCUPANCY (1) $138,962 28.6% $153,015 20.8% 780 ALL OTHER (2) 183,162 37.7% 203,597 27.7% 1,000 STORES AND DISTRIBUTION 322,124 66.4% 356,612 48.6% 1,780 MARKETING, GENERAL & ADMINISTR
Slide 20: Income Statement
Q1 2020 RESULTS INCOME STATEMENT GAAP NON-GAAP* % OF % OF % OF % OF (in thousands) 2020 NET SALES 2019 NET SALES 2020 NET SALES 2019 NET SALES NET SALES $485,359 100.0% $733,972 100.0% $485,359 100.0% $733,972 100.0% (1) GROSS PROFIT 264,145 54.4% 444,090 60.5% 264,145 54.4% 444,090 60.5% OPERATING
Slide 21: Financial Position, Liquidity & Capital Allocation
FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION 21
Slide 22: Financial Position and Liquidity Summary
FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION FINANCIAL POSITION AND LIQUIDITY SUMMARY LIQUIDITY REMAINING AVAILABILITY $914M CASH & EQUIVALENTS UNDER ABL FACILITY $900M $704M AS COMPARED TO $586M LAST YEAR May 2, 2020 BORROWING BASE $ 300.2 $832M ABL FACILITY SHORT-TERM BORROWINGS LESS: LETTER
Slide 23: Cash Flow Summary
FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION CASH FLOW SUMMARY CASH USED FOR OPERATING ACTIVITIES DURING Q1 2020 OF $91M AS COMPARED TO $71M DURING Q1 2019 CASH USED FOR INVESTING ACTIVITIES DURING Q1 2020 OF $47M AS COMPARED TO $44M DURING Q1 2019 CASH PROVIDED BY FINANCING ACTIVITIES DURING
Slide 24: Share Repurchases and Dividends
FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION SHARE REPURCHASES AND DIVIDENDS In order to preserve liquidity and increase financial flexibility, the Company has temporarily suspended its share repurchase and dividend programs and plans to reevaluate throughout the year to determine whether and
Slide 25: Balance Sheet
FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION BALANCE SHEET (in thousandths) MAY 2, 2020 FEBRUARY 1, 2020 MAY 4, 2019 CASH AND EQUIVALENTS $703,989 $671,267 $586,133 RECEIVABLES 88,639 80,251 82,026 INVENTORIES 426,594 434,326 432,350 OTHER CURRENT ASSETS 67,412 78,905 71,803 TOTAL CURRENT ASSE
Slide 26: Statement of Cash Flows
FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION STATEMENT OF CASH FLOWS (in thousandths) MAY 2, 2020 MAY 4, 2019 NET CASH USED FOR OPERATING ACTIVITIES $(90,776) $(71,316) PURCHASES OF PROPERTY AND EQUIPMENT (46,990) (43,872) NET CASH USED FOR INVESTING ACTIVITIES $(46,990) $(43,872) PROCEEDS FRO
Slide 27: Global Store Network Optimization
GLOBAL STORE NETWORK OPTIMIZATION 27
Slide 28: Stores as of Q1 2020; New Store Openings & Closings
GLOBAL STORE NETWORK OPTIMIZATION 849 STORES AS OF Q1 2020 NEW STORE OPENINGS & CLOSINGS UNITED TOTAL COMPANY TOTAL STATES CANADA EUROPE ASIA MIDDLE EAST END OF Q4 2019 854 647 17 129 51 10 OPENINGS 2 1 — — — 1 PERMANENT CLOSINGS (7) (5) — — (2) — END OF Q1 2020 849 643 17 129 49 11 UNITED HOLLISTER
Slide 29: Reduced Gross Square Footage by 14% Since 2015
GLOBAL STORE NETWORK OPTIMIZATION REDUCED GROSS SQUARE FOOTAGE BY 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% (
Slide 30: Store Fleet Detail
GLOBAL STORE NETWORK OPTIMIZATION STORE FLEET DETAIL 41% OF GLOBAL FLEET IN UPDATED FORMATS Q1 2020 STORE OPTIMIZATION ACTIVITY 898 HOLLISTER ABERCROMBIE TOTAL 900 868 861 854 849 NEW STORES — 2 2 800 REMODELS 1 — 1 700 661 RIGHT-SIZES — — — 588 NEW EXPERIENCES 1 2 3 600 524 STORE CLOSURES (3) (4) (
Slide 31: 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 6 Entered fiscal 2019 with 15 flagships after closing five flagship locations since fiscal 2017. 5 4 The combined 4-wall operating margin of the 15 flagships remai
Slide 32: Pond MAL ABE | | A
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Slide 33: Fiscal 2020 Outlook
OUTLOOK FISCAL 2020 OUTLOOK The company has seen, and may continue to see, material adverse impacts as a result of COVID-19. As the current circumstances and the impacts of COVID-19 on the company’s operations, including the duration and impact on overall customer demand, are dynamic, the company is
Slide 34: Appendix
Aberombie ARE | a&t | a | Gilly thos —
Slide 35: Reconciliation of GAAP to Non-GAAP Results
APPENDIX RECONCILIATION OF GAAP TO NON-GAAP RESULTS Q1 2020 EXCLUDED Q1 2020 GAAP ITEMS NON-GAAP ASSET IMPAIRMENT, EXCLUSIVE OF FLAGSHIP STORE $42,928 $42,928 $— EXIT CHARGES OPERATING LOSS (209,127) (42,928) (166,199) LOSS BEFORE INCOME TAXES (212,498) (42,928) (169,570) INCOME TAX EXPENSE (1) 31,5
Slide 36: Reconciliation of GAAP to Non-GAAP Results
APPENDIX RECONCILIATION OF GAAP TO NON-GAAP RESULTS NET SALES Q1 2020 Q1 2019 Δ % GAAP $485,359 $733,972 (34)% IMPACT FROM CHANGES IN FOREIGN CURRENCY EXCHANGE RATES (1) — (6,824) 1% NON-GAAP CONSTANT CURRENCY BASIS $485,359 $727,148 (33)% GROSS PROFIT Q1 2020 Q1 2019 Δ BPS (2) GAAP $264,145 $444,09
Slide 37: Abercrombie
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