Abercrombie & Fitch Company · NYSE:ANF
Abercrombie & Fitch — Q1 2023 Earnings Presentation
28 slides from Abercrombie & Fitch's earnings presentation, May 24, 2023
Slide 1: Investor Presentation: First Quarter 2023
INVESTOR PRESENTATION: FIRST QUARTER 2023
Slide 2: Table of Contents
TABLE OF CONTENTS Safe Harbor and Other Information 3 Company Overview 4 Q1 2023 Results 14 Appendix 19 2
Slide 3: Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This presentation contains forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These statements, including, without limitation, statements regarding our second q
Slide 4: Global, digitally-led, omnichannel apparel and accessories retailer
Abercrombie & Fitch Co. is a global, digitally-led, omnichannel apparel and accessories retailer catering to kids through millennials with assortments curated for their specific lifestyle needs Our corporate purpose of 'Being here for you on the journey to being and becoming who you are' fuels our p
Slide 5: Our Brands - Company Overview
OUR BRANDS COMPANY OVERVIEW 5
Slide 6: Brands for kids through millennials
> abercrombie kids = AGES 5-13 — : - AGES/21-40+ ‘
Slide 7: Our Journey
OUR JOURNEY GROWTH FOCUS, LEVERAGING TRANSFORMED LONG-TERM OPERATING MODEL 2017 2022 2023 2025 ASPIRATION STABILIZE TRANSFORM GROW TARGET GOAL REVENUE $3.7B $4.1-$4.3B $5.0B OPERATING ALWAYS MARGIN 3% FORWARD 8%+ 10%+ PLAN COMPANY OVERVIEW 7
Slide 8: Sales & Profitability History
SALES & PROFITABILITY HISTORY Fiscal Net Sales Gross Profit Rate Operating Income (Loss) (in $ billions) (as a % of net sales) (in $ millions) Decrease from 2021 primarily driven by 520 COVID basis point decline y/y CLOSURE due to elevated freight IMPACT and raw material cost COVID CLOSURE IMPACT TR
Slide 9: Always Forward Plan Pillars
ALWAYS FORWARD PLAN PILLARS ALWAYS FORWARD ALWAYS FORWARD PLAN INTRODUCED AT PLAN JUNE 2022 INVESTOR DAY 1 EXECUTE FOCUSED BRAND GROWTH PLANS 2025 TARGETS: •Data driven approach to store expansion •Grow brand lovers through digital marketing and social selling $4.1B - $4.3B REVENUES 8%+ OPERATING MA
Slide 10: Focused Brand Growth
1 FOCUSED BRAND GROWTH PRODUCT VOICE EXPERIENCE PRODUCT FRANCHISES DIGITAL CUSTOMER GEOGRAPHIC & EXTENSIONS ACQUISITION EXPANSION • Active (YPB in A&F) • Influencer Channel • Physical/Digital Experiences • A&F Best Dressed Guest • Social Commerce • U.S. & International Stores • Graphics Licensing (I
Slide 11: Enterprise-Wide Digital Revolution
2 ENTERPRISE-WIDE DIGITAL REVOLUTION • Modernize Foundation (Retail ERP, Data Infrastructure) • Consistency In Store and At Home • Powerful, Modern Loyalty Program • Personalization • Fast, Digital Product Testing • Real Estate Location Analytics COMPANY OVERVIEW 11
Slide 12: Financial Discipline
3 FINANCIAL DISCIPLINE GROSS MARGIN expansion from 2022 on 2021 2022 2025 TARGET improved AUR and lower AUC through net NET SALES $3.7B $3.7B $4.1B-$4.3B reduction in freight and raw materials costs GROSS PROFIT (1) 62.3% 56.9% 60% - 63% OPERATING EXPENSE (1) 53.3% 54.5% 52% - 53% OPERATING EXPENSE
Slide 13: 2023 Q1 Always Forward Highlights
“Fiscal 2023 is off to a strong start with first quarter net sales and operating margin above our expectations. Net sales grew 3% to last 2023 Q1 ALWAYS FORWARD HIGHLIGHTS year, led by Abercrombie brands where we grew 14%, achieving the highest first quarter sales in more than a decade.” Fran Horowi
Slide 14: 2023 Q1 Sales Results
2023 Q1 SALES RESULTS Total Company Net Sales Abercrombie Brands Net Sales Hollister Brands Net Sales (in $ millions) (in $ millions) (in $ millions) $560 +14% Y/Y $1,200 +3% $639 -7% Y/Y $422 $436 Y/Y $384 $368 $458 $813 $880 $836 $429 $437 $805 $400 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q1 2022
Slide 15: 2023 Q1 Gross Profit / Operating Income
2023 Q1 GROSS PROFIT/ OPERATING INCOME Gross Profit Rate Operating Income (Loss) (as a % of net sales) +570 bps (in $ millions) YoY 59.2% 61.0% 55.3% 57.9% 55.7% $87 +$44M YoY $34 $18 $(2) $(10) Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 • Year-over-year AUR grow
Slide 16: 2023 Q1 Financial Position
2023 Q1 FINANCIAL POSITION CASH & EQUIVALENTS Inventory • $447M as compared to $468M last year INVENTORIES • $448M, down 20% from last year SHORT-TERM BORROWINGS • No borrowings outstanding under the company's senior secured revolving credit facility ("ABL Facility") • $311M of borrowing available u
Slide 17: 2023 Fiscal Outlook
The following outlook replaces all previous full year guidance. 2023 FISCAL OUTLOOK For fiscal 2023, the company now expects: • Net sales growth in the range of 2 to 4% from $3.7 billion in 2022. This is an increase to the previous outlook of up 1 to 3%. The current outlook assumes that Abercrombie
Slide 18: 2023 Q2 Quarterly Outlook
2023 Q2 QUARTERLY OUTLOOK For the second quarter of fiscal 2023, the company expects: • Net sales growth to be in the range of 4 to 6% compared to fiscal second quarter 2022 level of $805 million. • Operating margin to be in the range of 2 to 3% compared to breakeven in Q2 2022 period on expected ne
Slide 19: Appendix
APPENDIX 19
Slide 20: Income Statement
INCOME STATEMENT GAAP % OF % OF (in thousands) Q1 2023 NET SALES Q1 2022 NET SALES NET SALES $835,994 100.0% $812,762 100.0% (1) (2) GROSS PROFIT 509,794 61.0% 449,546 55.3% OPERATING EXPENSE 478,680 57.3% 463,114 57.0% OTHER OPERATING INCOME, NET (2,894) (0.3)% (3,842) (0.5)% OPERATING INCOME (LOSS
Slide 21: Operating Expense
OPERATING EXPENSE % OF % OF 1 YR Δ (in thousands) Q1 2023 NET SALES Q1 2022 NET SALES BPS (3) STORES AND DISTRIBUTION 331,613 39.7% 337,543 41.5% (180) MARKETING, GENERAL & ADMINISTRATIVE 142,631 17.1% 122,149 15.0% 210 ASSET IMPAIRMENT 4,436 0.5% 3,422 0.4% 10 TOTAL OPERATING EXPENSE - GAAP $478,68
Slide 22: Balance Sheet
BALANCE SHEET (in thousands) APRIL 29, 2023 JANUARY 28, 2023 APRIL 30, 2022 CASH AND EQUIVALENTS $446,952 $517,602 $468,378 RECEIVABLES 106,149 104,506 88,807 INVENTORIES 447,806 505,621 562,510 OTHER CURRENT ASSETS 107,684 100,289 93,179 TOTAL CURRENT ASSETS $1,108,591 $1,228,018 $1,212,874 PROPERT
Slide 23: Statement of Cash Flows
STATEMENT OF CASH FLOWS YEAR TO DATE PERIOD ENDED (in thousands) APRIL 29, 2023 APRIL 30, 2022 NET CASH USED FOR OPERATING ACTIVITIES $(560) $(217,787) PURCHASES OF PROPERTY AND EQUIPMENT (46,391) (26,292) PROCEEDS FROM THE SALE OF PROPERTY AND EQUIPMENT — 7,751 NET CASH USED FOR INVESTING ACTIVITIE
Slide 24: Share Repurchases
SHARE REPURCHASES SINCE THE START OF 2021, THE COMPANY REPURCHASED APPROXIMATELY 15 MILLION SHARES FOR APPROXIMATELY $503 MILLION. THERE ARE APPROXIMATELY $232 MILLION REMAINING UNDER OUR PREVIOUSLY AUTHORIZED SHARE REPURCHASE PROGRAM. SHARE REPURCHASES (1) (in thousands, except NUMBER OF AVERAGE fo
Slide 25: Reconciliation of GAAP to Non-GAAP Results
RECONCILIATION OF GAAP TO NON-GAAP RESULTS STATEMENT OF OPERATIONS Q1 2023 EXCLUDED Q1 2023 (in thousands) GAAP ITEMS NON-GAAP ASSET IMPAIRMENT $4,436 $4,436 $— OPERATING INCOME 34,008 (4,436) 38,444 INCOME BEFORE TAXES 30,565 (4,436) 35,001 INCOME TAX EXPENSE (1) 12,718 (1,187) 13,905 NET INCOME $1
Slide 26: Reconciliation of GAAP to Non-GAAP Results
RECONCILIATION OF GAAP TO NON-GAAP RESULTS STATEMENT OF OPERATIONS NET SALES Q1 2023 Q1 2022 Δ% GAAP $835,994 $812,762 3% IMPACT FROM CHANGES IN FOREIGN CURRENCY EXCHANGE RATES (1) — (8,597) 1% NON-GAAP CONSTANT CURRENCY BASIS $835,994 $804,165 4% GROSS PROFIT Q1 2023 Q1 2022 Δ BPS (2) GAAP $509,794
Slide 27: Reconciliation of GAAP to Non-GAAP Results
RECONCILIATION OF GAAP TO NON-GAAP RESULTS NET SALES BY BRAND AND GEOGRAPHY Q1 2022 NON-GAAP IMPACT FROM CONSTANT CHANGES IN FOREIGN NON-GAAP CURRENCY CURRENCY EXCHANGE CONSTANT GAAP BASIS (in thousands) Q1 2023 GAAP RATES (1) CURRENCY BASIS Δ% Δ% NET SALES BY BRAND: ABERCROMBIE (2) 436,044 383,928
Slide 28: Abercrombie & Fitch Co.
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Abercrombie & Fitch Company — Q1 2023 Earnings Presentation on 6ix