Abercrombie & Fitch Company · NYSE:ANF
Abercrombie & Fitch — Q3 2020 Earnings Presentation
32 slides from Abercrombie & Fitch's earnings presentation, Nov 25, 2020
Slide 1: Investor Presentation: Third Quarter 2020
INVESTOR PRESENTATION: THIRD QUARTER 2020
Slide 2: Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
2 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 ri
Slide 3: Table of Contents
3 TABLE OF CONTENTS Safe Harbor and Other Information 2 Company Overview 4 Response to COVID-19 7 Q3 2020 Results 12 Financial Position, Liquidity & Capital Allocation 18 Global Store Network Optimization 24 Appendix 29
Slide 4: Company Overview
pi ey 1 wy COMPANY OVERVIEW
Slide 5: Iconic Brands: Hollister, Abercrombie Kids, Abercrombie & Fitch
5 HOLLISTER 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
Slide 6: Global, Omnichannel Retailer
6 IN THE LAST TWELVE MONTHS DIGITAL SALES WERE $1.5B, OR 48% OF TOTAL NET SALES 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 LICE
Slide 7: Response to COVID-19
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Slide 8: Transformation Initiatives
8 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 OMNI-CHANNEL CAPABILITIES • Creating best-in-class customer experiences while growing profitably across channels INCREASING TH
Slide 9: Focusing on the Well-Being of Associates and Customers
9 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 wellness checks in accordance with local government
Slide 10: Pivoting Marketing and Updating Messaging
10 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 t
Slide 11: 767 Stores, 90% of Store Fleet, Currently Open
11 We plan to follow the guidance of local governments when evaluating whether further store closures will be necessary and to determine when we can reopen temporarily closed stores. Stores that are currently open may have reduced operating hours. RESPONSE TO COVID-19 767 STORES, 90% OF STORE FLEET,
Slide 12: Q3 2020 Results
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Slide 13: Management commentary on Q3 results
13 “I am proud of our global teams and partners. Reflecting your ongoing hard work and perseverance, we delivered our best third quarter operating income in eight years. Results were fueled by 43% year-over-year digital sales growth and sequential sales improvements in our global store base. Updated
Slide 14: Significant Items Impacting Q3 2020 Results
14 SIGNIFICANT ITEMS IMPACTING Q3 2020 RESULTS • Net sales decreased 5%, or $44M, as compared to last year, driven by the adverse impact of COVID-19 on store sales • Store occupancy expense decreased $24M, reflecting the impact of temporary store closures and COVID-19 • Store payroll expense decreas
Slide 15: Q3 2020 Results: Net Sales
15 Q3 2020 RESULTS NET SALES ABERCROMBIE $343M DOWN 2% TO LAST YEAR 41.8% OF TOTAL NET SALES HOLLISTER $477M DOWN 7% TO LAST YEAR 58.2% OF TOTAL NET SALES EMEA $190M DOWN 1% TO LAST YEAR 23.2% OF TOTAL NET SALES UNITED STATES $558M DOWN 4% TO LAST YEAR 68.1% OF TOTAL NET SALES TOTAL COMPANY NET SALE
Slide 16: Q3 2020 Results: Operating Expense
16 GAAP NON-GAAP* Q3 2020 RESULTS OPERATING EXPENSE * Q3 non-GAAP operating expense is presented on an adjusted non-GAAP basis, and excludes the effect of certain items set out of page 30. (1) Includes operating lease costs, other landlord charges, utilities, depreciation and other occupancy expense
Slide 17: Q3 2020 Results: Income Statement
17 Q3 2020 RESULTS INCOME STATEMENT * The non-GAAP income statement is presented on an adjusted non-GAAP basis, and excludes the effect of certain items set out on page 30. (1) Gross profit is derived from cost of sales, exclusive of depreciation and amortization. GAAP NON-GAAP* (in thousands) Q3 20
Slide 18: Financial Position, Liquidity & Capital Allocation
18 FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION
Slide 19: Financial Position and Liquidity Summary
19 FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION FINANCIAL POSITION AND LIQUIDITY SUMMARY CASH & EQUIVALENTS $813M AS COMPARED TO $411M LAST YEAR SHORT-TERM BORROWINGS NO BORROWINGS OUTSTANDING UNDER ABL FACILITY $345M OF BORROWING AVAILABLE UNDER ABL FACILITY GROSS LONG-TERM BORROWINGS $350M O
Slide 20: Cash Flow Summary
20 (in thousands) NET CASH PROVIDED BY OPERATING ACTIVITIES CAPITAL EXPENDITURES FREE CASH FLOW (1) FY 2015 $315,755 $143,199 $172,556 FY 2016 $185,169 $140,844 $44,325 FY 2017 $287,658 $107,001 $180,657 FY 2018 $352,933 $152,393 $200,540 FY 2019 $300,685 $202,784 $97,901 YTD 2020 $158,894 $91,748 $
Slide 21: Share Repurchases and Dividends
21 SHARE REPURCHASES (in thousands, except for average cost) NUMBER OF SHARES COST AVERAGE COST DIVIDENDS TOTAL Q1 2020 1,397 $15,172 $10.86 $12,556 $27,728 YTD 2020 1,397 $15,172 $10.86 $12,556 $27,728 FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION SHARE REPURCHASES AND DIVIDENDS SHARE REPURCHA
Slide 22: Balance Sheet
22 FINANCIAL POSITION, LIQUIDITY & CAPITAL ALLOCATION BALANCE SHEET (in thousands) OCTOBER 31, 2020 FEBRUARY 1, 2020 NOVEMBER 2, 2019 CASH AND EQUIVALENTS $812,881 $671,267 $410,775 RECEIVABLES 89,074 80,251 92,736 INVENTORIES 545,548 434,326 590,883 OTHER CURRENT ASSETS 73,776 78,905 86,275 TOTAL C
Slide 23: Cash Flow Statement
23 YEAR TO DATE PERIOD ENDED (in thousands) OCTOBER 31, 2020 NOVEMBER 2, 2019 NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES $158,894 $(33,839) PURCHASES OF PROPERTY AND EQUIPMENT (91,748) (154,373) NET CASH USED FOR INVESTING ACTIVITIES $(91,748) $(154,373) PROCEEDS FROM ISSUANCE OF SENIOR SE
Slide 24: Global Store Network Optimization
24 GLOBAL STORE NETWORK OPTIMIZATION
Slide 25: New Store Openings & Closings
25 NEW STORE OPENINGS & CLOSINGS GLOBAL STORE NETWORK OPTIMIZATION 849 STORES AS OF Q3 2020 (1) Locations with Gilly Hicks carveouts within Hollister stores are represented as a single store count. Excludes nine international franchise stores as of each of October 31, 2020 and February 1, 2020. Excl
Slide 26: Gross Square Footage Reduced 15% Since 2015
26 GLOBAL STORE NETWORK OPTIMIZATION GROSS SQUARE FOOTAGE REDUCED 15% 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 Q3 2020 2,568 1,257 1,817 575 4,385 1,832 6,217 % CHANGE
Slide 27: Store Fleet Detail and YTD 2020 Optimization Activity
27 YTD 2020 STORE OPTIMIZATION ACTIVITY Q3 2020 STORE FLEET DETAIL GLOBAL STORE NETWORK OPTIMIZATION STORE FLEET DETAIL 43% OF GLOBAL FLEET IN UPDATED FORMATS HOLLISTER ABERCROMBIE TOTAL COMPANY # OF STORES % OF FLEET # OF STORES % OF FLEET # OF STORES % OF FLEET LEGACY STORES 232 43% 185 60% 417 49
Slide 28: Flagship Store Fleet and Lease Expirations
28 (1) Includes the Hollister 5th Avenue, New York City and A&F Ginza, Japan locations. GLOBAL STORE NETWORK OPTIMIZATION FLAGSHIP STORE FLEET FLAGSHIP LEASE EXPIRATIONS The company ended fiscal 2019 with 15 flagships after closing five flagship locations since the beginning of fiscal 2017. In fisca
Slide 29: Appendix
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Slide 30: Reconciliation of GAAP to Non-GAAP Results
30 (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) Q3 2020 GAAP EXCLUDED ITEMS Q3 2020 NON-GAAP ASSET IMPAIRMENT, EXCLUSIVE OF FLAGSHIP STORE EXIT CHARGES $6,329 $6,329 $— OPERATING INCOME 58,
Slide 31: Reconciliation of GAAP to Non-GAAP Results
31 APPENDIX RECONCILIATION OF GAAP TO NON-GAAP RESULTS NET SALES Q3 2020 Q3 2019 Δ % GAAP $819,653 $863,472 (5)% IMPACT FROM CHANGES IN FOREIGN CURRENCY EXCHANGE RATES (1) — 11,896 (1)% NON-GAAP CONSTANT CURRENCY BASIS $819,653 $875,368 (6)% GROSS PROFIT Q3 2020 Q3 2019 Δ BPS (2) GAAP $524,433 $518,
Slide 32: Abercrombie & Fitch Co.
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