Abercrombie & Fitch Company · NYSE:ANF
Abercrombie & Fitch — Q4 2018 Earnings Presentation
29 slides from Abercrombie & Fitch's earnings presentation, Mar 7, 2019
Slide 1: Investor Presentation Fourth Quarter 2018
INVESTOR PRESENTATION FOURTH QUARTER 2018
Slide 2: Safe Harbor Statement
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 PHASE PHASE PHASE 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
Slide 4: Our Transformation Initiatives
OUR TRANSFORMATION INITIATIVES OPTIMIZING OUR STORE NETWORK • RIGHTSIZING STORE FLEET AND ADAPTING TO THE EVOLVING ROLE OF THE STORE AS CUSTOMERS' SHOPPING PREFERENCES SHIFT ENHANCING DIGITAL AND OMNI-CHANNEL CAPABILITIES • CREATING BEST-IN-CLASS CUSTOMER EXPERIENCES WHILE GROWING PROFITABLY ACROSS
Slide 5: Our Fiscal 2020 Targets
OUR FISCAL 2020 TARGETS AS PRESENTED DURING OUR INVESTOR DAY ON APRIL 25, 2018 LOW SINGLE-DIGIT SALES CAGR – POSITIVE COMPARABLE SALES – GLOBAL MARKET EXPANSION MODEST GROSS PROFIT RATE EXPANSION OPERATING EXPENSE LEVERAGE DOUBLE FISCAL 2017 ADJUSTED NON-GAAP EBIT MARGIN OF 2.9% 5
Slide 6: CEO Commentary
CEO COMMENTARY "We ended 2018 on a strong note, recording our sixth consecutive quarter and second consecutive full year of positive comparable sales while exceeding $1 billion in annual digital sales. I am proud of our team and all we have accomplished this year. Most importantly, while delivering
Slide 7: Q4 P&L Summary
Q4 P&L SUMMARY % OF NET % OF NET 2018 SALES 2017 SALES NET SALES $1,155,602 100.0% $1,193,158 100.0% GROSS PROFIT 682,857 59.1% 697,395 58.4% OPERATING EXPENSE 554,555 48.0% 569,438 47.7% OTHER OPERATING INCOME, NET (1,364) (0.1)% (12,383) (1.0)% OPERATING INCOME 129,666 11.2% 140,340 11.8% INTEREST
Slide 8: Q4 Adjusted P&L Summary
Q4 ADJUSTED P&L SUMMARY* % OF NET % OF NET 2018 SALES 2017 SALES NET SALES $1,155,602 100.0% $1,193,158 100.0% GROSS PROFIT 682,857 59.1% 697,395 58.4% OPERATING EXPENSE 554,555 48.0% 561,392 47.1% OTHER OPERATING INCOME, NET (1,364) (0.1)% (12,383) (1.0)% OPERATING INCOME 129,666 11.2% 148,386 12.4
Slide 9: Full Year P&L Summary
FULL YEAR P&L SUMMARY % OF NET % OF NET 2018 SALES 2017 SALES NET SALES $3,590,109 100.0% $3,492,690 100.0% GROSS PROFIT 2,159,916 60.2% 2,083,842 59.7% OPERATING EXPENSE 2,038,465 56.8% 2,028,730 58.1% OTHER OPERATING INCOME, NET (5,915) (0.2)% (16,938) (0.5)% OPERATING INCOME 127,366 3.5% 72,050 2
Slide 10: Full Year Adjusted P&L Summary
FULL YEAR ADJUSTED P&L SUMMARY* % OF NET % OF NET 2018 SALES 2017 SALES NET SALES $3,590,109 100.0% $3,492,690 100.0% GROSS PROFIT 2,159,916 60.2% 2,083,842 59.7% OPERATING EXPENSE 2,027,199 56.5% 1,999,999 57.3% OTHER OPERATING INCOME, NET (5,915) (0.2)% (16,938) (0.5)% OPERATING INCOME 138,632 3.9
Slide 11: Excluded Items
EXCLUDED ITEMS 2018 Q1 Q2 Q3 Q4 FULL YEAR LEGAL CHARGES $5,600 $— $(3,005) $— $2,595 ASSET IMPAIRMENT — 8,671 — — 8,671 PRE-TAX EXCLUDED ITEMS 5,600 8,671 (3,005) — 11,266 TAX EFFECT (1) (1,541) (2,689) 1,064 683 (2,483) TAX CUTS AND JOBS ACT OF 2017 CHARGES — 2,042 405 (5,982) (3,535) TOTAL EXCLUDE
Slide 12: Q4 Net Sales of $1.2B, Down 3%
Q4 NET SALES OF $1.2B, DOWN 3% FROM LAST YEAR YTD YEAR-OVER-YEAR DECREASE DRIVEN BY A COMBINED ADVERSE IMPACT OF 6% FROM THE LOSS OF 2017'S 53RD WEEK AND THE CALENDAR SHIFT, AS WELL AS CHANGES IN FOREIGN CURRENCY ABERCROMBIE ABE40.9%RCRO MBIE 40.2% BRAND HOHOLLISTERLLISTER C CO.O. HOLLISTER ABERCROM
Slide 13: Q4 Comparable Sales of 3%
Q4 COMPARABLE SALES OF 3%* YTD EXCLUDING ADVERSE IMPACTS FROM THE LOSS OF FISCAL 2017'S 53RD WEEK AND CALENDAR SHIFT, AS WELL AS CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ABERCROMBIE ABE40.9%RCRO MBIE 40.2% HOHOLLISTERLLISTER C CO.O. 59.1%59. 8% 6% HOLLISTER 5% -2% INTERNATIONAL UNITED STATES INTER
Slide 14: Full Year Net Sales of $3.6B, Up 3%
FULL YEAR NET SALES OF $3.6B, UP 3% FROM LAST YTD YEAR, INCLUDING $1.1B IN DIGITAL SALES ABERCROMBIE BRAND ABE40.9%RCRO MBIE 40.2% HOLLISTER ABERCROMBIE HOHOLLISTERLLISTER C CO.O. $2.15B $1.44B 59.1%59. 8% • 60.0% OF TOTAL NET SALES • 40.0% OF TOTAL NET SALES • NET SALES UP 6% FROM LAST YEAR • NET S
Slide 15: Full Year Comparable Sales of 3%
FULL YEAR COMPARABLE SALES OF 3%* YTD EXCLUDING THE ADVERSE IMPACT FROM THE LOSS OF FISCAL 2017'S 53RD WEEK AND BENEFITS FROM CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ABERCROMBIE ABE40.9%RCRO MBIE 40.2% HOHOLLISTERLLISTER C CO.O. 59.1%59. 8% 5% HOLLISTER 6% -2% INTERNATIONAL UNITED STATES INTERNAT
Slide 16: Q4 Operating Expense
Q4 OPERATING EXPENSE GAAP % OF NET GAAP % OF NET 2018 SALES 2017 SALES Δ bps (3) STORE OCCUPANCY (1) $157,111 13.6% $165,432 13.9% (30) ALL OTHER (2) 277,345 24.0% 271,825 22.8% 120 STORES AND DISTRIBUTION 434,456 37.6% 437,257 36.6% 100 MARKETING, GENERAL & ADMINISTRATIVE 118,902 10.3% 128,135 10.7
Slide 17: Full Year Operating Expense
FULL YEAR OPERATING EXPENSE GAAP % OF NET GAAP % OF NET 2018 SALES 2017 SALES Δ bps (3) STORE OCCUPANCY (1) $628,975 17.5% $659,259 18.9% (140) ALL OTHER (2) 913,047 25.4% 883,166 25.3% 10 STORES AND DISTRIBUTION 1,542,022 43.0% 1,542,425 44.2% (120) MARKETING, GENERAL & ADMINISTRATIVE 484,863 13.5%
Slide 18: Share Repurchases and Dividends
SHARE REPURCHASES AND DIVIDENDS SHARE REPURCHASES (1) 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 Q4 2018 — — — 13,164 13,164 YEAR TO DATE 2018 2,931.7 $68,670 $23.
Slide 19: Stores Globally as of Q4 2018
861 STORES GLOBALLY AS OF Q4 2018 EXCLUDING 15 INTERNATIONAL FRANCHISE STORES ACROSS BRANDS 123 18 CANADA EUROPE 663 9 48 UNITED STATES MIDDLE EAST ASIA 542 HOLLISTER 319 ABERCROMBIE 19
Slide 20: Q4 Store Count Activity
Q4 STORE COUNT ACTIVITY UNITED MIDDLE TOTAL COMPANY TOTAL STATES CANADA EUROPE ASIA EAST END OF Q3 2018 879 684 18 120 48 9 OPENINGS 6 3 — 3 — — CLOSINGS (24) (24) — — — — END OF Q4 2018 861 663 18 123 48 9 HOLLISTER (1) END OF Q3 2018 547 400 11 102 29 5 OPENINGS 4 2 — 2 — — CLOSINGS (9) (9) — — —
Slide 21: Q4 New Store Openings
Q4 NEW STORE OPENINGS BRAND CENTER CITY DATE LA PALMERA CORPUS CHRISTI, TEXAS 11/12/2018 THE MALL OF VICTOR VALLEY VICTORVILLE, CALIFORNIA 11/21/2018 HOLLISTER RIEM ARCADEN MUNICH, GERMANY 12/21/2018 ETTLINGER TOR KARLSRUHE, GERMANY 2/1/2019 KEYSTONE INDIANAPOLIS, INDIANA 11/9/2018 A&F MYZEIL FRANKF
Slide 22: Store Optimization Activity
STORE OPTIMIZATION ACTIVITY Q4 2018 HOLLISTER ABERCROMBIE (1) TOTAL COMPANY NEW STORES 4 2 6 REMODELS 3 — 3 RIGHT-SIZES — 3 3 TOTAL NEW EXPERIENCES 7 5 12 STORE CLOSURES (9) (15) (24) FULL YEAR 2018 HOLLISTER ABERCROMBIE (1) TOTAL COMPANY NEW STORES 13 9 22 REMODELS 28 1 29 RIGHT-SIZES 5 11 16 TOTAL
Slide 23: Fiscal 2019 Store Optimization Outlook
FISCAL 2019 STORE OPTIMIZATION OUTLOOK* HOLLISTER ABERCROMBIE (1) TOTAL COMPANY NEW STORES 20 20 40 REMODELS 25 — 25 RIGHT-SIZES 10 10 20 TOTAL NEW EXPERIENCES 55 30 85 STORE CLOSURES UP TO 40 * Figures presented on this slide are estimated approximations and actual new store experiences for fiscal
Slide 24: Fiscal 2019 Outlook
FISCAL 2019 OUTLOOK EXCLUDES IMPACTS FROM IMPLEMENTING THE NEW LEASE ACCOUNTING STANDARD FULL YEAR OUTLOOK NET SALES (1) UP IN THE RANGE OF 2% TO 4% CHANGES IN FOREIGN CURRENCY $15M ADVERSE IMPACT TO NET SALES COMPARABLE SALES (2) UP LOW-SINGLE DIGITS GROSS PROFIT RATE (3) UP SLIGHTLY GAAP OPERATING
Slide 25: Appendix
Abercrombie ARF | af | wl | pit hicfoy & Fitch Co. APPENDIX
Slide 26: Q4 Adjusted Non-GAAP Reconciliation
Q4 ADJUSTED NON-GAAP RECONCILIATION 2018 EXCLUDED 2018 GAAP ITEMS NON-GAAP INCOME BEFORE INCOME TAXES (1) $127,565 $— $127,565 INCOME TAX EXPENSE (2) 29,201 (5,299) 34,500 NET INCOME $96,936 $5,299 $91,637 NET INCOME PER DILUTED SHARE $1.42 $0.08 $1.35 DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING 68,
Slide 27: Full Year Adjusted Non-GAAP Reconciliation
FULL YEAR ADJUSTED NON-GAAP RECONCILIATION 2018 EXCLUDED 2018 GAAP ITEMS NON-GAAP MARKETING, GENERAL & ADMINISTRATIVE (1) $484,863 $2,595 $482,268 ASSET IMPAIRMENT (2) $11,580 $8,671 $2,909 OPERATING INCOME 127,366 (11,266) 138,632 INCOME BEFORE INCOME TAXES 116,367 (11,266) 127,633 INCOME TAX EXPEN
Slide 28: Relaunch of Iconic Fierce Fragrance
RELAUNCH OF ICONIC FIERCE FRAGRANCE involves a fully integrated marketing campaign and combines in-store, digital and experiential activations. The new Faces of Fierce include athletes, LGBTQ+ activists, mental health advocates and a group of Malibu surfers who, as volunteer firefighters, bravely fo
Slide 29: Abercrombie & Fitch Co.
Abercrombie ARE | at | a | 9 hiheg & Fitch Co. Abercrombie & Fitch Co. Abecombie abaisenbie | HOLLISTER pits bicheg