Abercrombie & Fitch Company · NYSE:ANF
Abercrombie & Fitch — Q1 2022 Earnings Presentation
32 slides from Abercrombie & Fitch's earnings presentation, May 25, 2022
Slide 1: Investor Presentation: First Quarter 2022
INVESTOR PRESENTATION: FIRST 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 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
Safe Harbor and Other Information 2 Company Overview 4 Focus Areas 7 Digital Evolution 10 Global Store Network Optimization 12 Q1 2022 Results 15 Financial Position, Liquidity & Capital Allocation 21 Updated Fiscal 2022 Outlook 27 Appendix 29 TABLE OF CONTENTS
Slide 4: Company Overview
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Slide 5: Brand descriptions: Hollister, Gilly Hicks, abercrombie kids, Social Tourist
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 6: Global, digitally-led omnichannel retailer
6 728 GLOBAL, DIGITALLY-LED OMNICHANNEL RETAILER COMPANY-OPERATED RETAIL STORES THE COMPANY'S PRODUCTS ARE SOLD GLOBALLY, PRIMARILY THROUGH ITS COMPANY-OWNED DIGITAL AND STORE CHANNELS, AS WELL AS THROUGH VARIOUS THIRD-PARTY ARRANGEMENTS CAPABILITY TO SHIP TO OVER 110 COUNTRIES GLOBAL BRANDS WHOLESA
Slide 7: Focus Areas
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Slide 8: Our previously-stated transformation initiatives
OUR PREVIOUSLY-STATED TRANSFORMATION INITIATIVES 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 gr
Slide 9: Focus areas for fiscal 2022
THE FOLLOWING FOCUS AREAS FOR FISCAL 2022 SERVE AS A FRAMEWORK TO THE COMPANY ACHIEVING SUSTAINABLE GROWTH AND LONG-TERM OPERATING MARGIN EXPANSION OUR FOCUS AREAS FOR 2022 ACCELERATE DIGITAL, DATA AND TECHNOLOGY INVESTMENTS TO INCREASE AGILITY AND IMPROVE THE CUSTOMER EXPERIENCE CREATE A MORE PERSO
Slide 10: Digital Evolution
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Slide 11: Digital evolution: aggressively investing to support transformation
* 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 unprecedented period. INVESTMENTS IN DIGITAL AND OMNICHANNEL CAPABILITIES OF $150M+ FISCAL 2017
Slide 12: Global Store Network Optimization
GLOBAL STORE NETWORK OPTIMIZATION 12
Slide 13: Removed 1.5M gross square feet globally since 2018
13 REMOVED 1.5M GROSS SQUARE FEET GLOBALLY SINCE 2018; EXPECT TO SEE NET STORE OPENINGS IN 2022 Total stores FY18 FY19 FY20 FY21 Q1 22 * 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
Slide 14: 90% of U.S. stores located in A/B malls
14 90% OF U.S. STORES LOCATED IN A/B MALLS; CONTINUE TO REPOSITION GLOBAL FLEET * Mall rating based on Green Street Advisors as of April 2022. YTD STORE ACTIVITY Q1 2022 STORE FLEET DETAIL HOLLISTER ABERCROMBIE TOTAL COMPANY # OF STORES % OF FLEET # OF STORES % OF FLEET # OF STORES % OF FLEET LEGACY
Slide 15: Q1 2022 Results
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Slide 16: Q1 2022 Results
Q1 2022 RESULTS “First quarter net sales exceeded expectations, rising 4% to $813 million, our highest first quarter level since 2014. Results were driven by ongoing strength at the Abercrombie & Fitch brand, where global sales were above plan. Net sales at Hollister were in line with expectations.
Slide 17: Significant items impacting Q1 2022 results
SIGNIFICANT ITEMS IMPACTING Q1 2022 RESULTS • Net sales increased 4%, or $31M, as compared to last year. • Gross margin rate declined 810 basis points as compared to last year to 55.3%, driven by higher average unit cost from freight inflation partially offset by higher average unit retail on lower
Slide 18: Total company net sales up 4% compared to Q1 2021
TOTAL COMPANY NET SALES UP 4% COMPARED TO Q1 2021, TO $813M ABERCROMBIE $384M UP 13% TO LAST YEAR 47.2% OF TOTAL NET SALES HOLLISTER $429M DOWN 3% TO LAST YEAR 52.8% OF TOTAL NET SALES EMEA $164M UP 3% TO LAST YEAR 20.2% OF TOTAL NET SALES UNITED STATES (1) $585M UP 6% TO LAST YEAR 72.0% OF TOTAL NE
Slide 19: Reconciliation of GAAP to non-GAAP operating expense
(in thousands) Q1 2022 % OF NET SALES Q1 2021 % OF NET SALES 1 YR Δ BPS (3) STORE OCCUPANCY (1) $103,191 12.7% $107,277 13.7% (100) ALL OTHER (2) 234,352 28.8% 209,331 26.8% 200 STORES AND DISTRIBUTION 337,543 41.5% 316,608 40.5% 100 MARKETING, GENERAL & ADMINISTRATIVE 122,149 15.0% 120,947 15.5% (5
Slide 20: Q1 2022 GAAP income statement
(1) Gross profit is derived from cost of sales, exclusive of depreciation and amortization. (2) Gross profit rate of 55.3% is down 810 basis points as compared to last year, driven by approximately $80 million of higher average unit freight costs, partially offset by higher average unit retail on lo
Slide 21: Financial Position, Liquidity & Capital Allocation
FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION 21
Slide 22: Strong financial position and liquidity
22 FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATIONSTRONG FINANCIAL POSITION AND LIQUIDITY CASH & EQUIVALENTS $468M AS COMPARED TO $909M LAST YEAR, AS COMPANY UTILIZED EXCESS CASH TO FUND SHARE REPURCHASES SHORT-TERM BORROWINGS NO BORROWINGS OUTSTANDING UNDER ABL FACILITY $314M OF BORROWING AVAILA
Slide 23: 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 24: Share repurchases and dividends
The company repurchased approximately 3.3 million shares and has returned $100 million to shareholders during the quarter ended April 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 2018 2,932 $
Slide 25: Condensed balance sheet
(in thousands) APRIL 30, 2022 JANUARY 29, 2022 MAY 1, 2021 CASH AND EQUIVALENTS $468,378 $823,139 $909,008 RECEIVABLES 88,807 69,102 107,821 INVENTORIES 562,510 525,864 388,633 OTHER CURRENT ASSETS 93,179 89,654 78,727 TOTAL CURRENT ASSETS $1,212,874 $1,507,759 $1,484,189 PROPERTY AND EQUIPMENT, NET
Slide 26: Condensed cash flow statement
YEAR TO DATE PERIOD ENDED (in thousands) APRIL 30, 2022 MAY 1, 2021 NET CASH USED FOR OPERATING ACTIVITIES $(217,787) $(131,350) PURCHASES OF PROPERTY AND EQUIPMENT (26,292) (14,404) PROCEEDS FROM THE SALE OF PROPERTY AND EQUIPMENT 7,751 — NET CASH USED FOR INVESTING ACTIVITIES $(18,541) $(14,404) P
Slide 27: Updated Fiscal 2022 Outlook
27 UPDATED FISCAL 2022 OUTLOOK
Slide 28: Updated fiscal 2022 outlook
PREVIOUS FULL YEAR OUTLOOK CURRENT FULL YEAR OUTLOOK (1) NET SALES IN THE RANGE OF UP 2% TO 4% IN THE RANGE OF FLAT TO UP 2% (2) OPERATING INCOME IN THE RANGE OF 7% TO 8% IN THE RANGE OF 5% TO 6%(3) EFFECTIVE TAX RATE HIGH 20s MID 30s UPDATED FISCAL 2022 OUTLOOK OUTLOOK WE INTEND TO AGGRESSIVELY PUR
Slide 29: Appendix
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Slide 30: 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) Q1 2022 GAAP EXCLUDED ITEMS Q1 2022 NON-GAAP ASSET IMPAIRMENT, EXCLUSIVE OF FLAGSHIP STORE EXIT CHARGES $3,422 $3,422 $— OPERATING LOSS (9,726)
Slide 31: Constant currency reconciliation
NET SALES Q1 2022 Q1 2021 Δ % GAAP $812,762 $781,405 4% IMPACT FROM CHANGES IN FOREIGN CURRENCY EXCHANGE RATES (1) — (8,529) 1% NON-GAAP CONSTANT CURRENCY BASIS $812,762 $772,876 5% GROSS PROFIT Q1 2022 Q1 2021 Δ BPS (2) GAAP $449,546 $495,134 (810) IMPACT FROM CHANGES IN FOREIGN CURRENCY EXCHANGE R
Slide 32: Abercrombie & Fitch Co.
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