I listened to the Abercrombie & Fitch conference call this morning to hear the company’s upcoming plans for Hollister, the surf industry’s arch competitor.
Hollister is still the company’s biggest growth vehicle both domestically and internationally. Here are some details:
– A multi-level Hollister flagship will open in Soho in spring 2009, with the goal of cementing “the iconic status of the Hollister brand in preparation for international growth,” Abercrombie executives said.
– Hollister stores in Canada have recorded three times the sales as their U.S. counterparts.
– Hollister will enter the U.K. market with four stores in shopping centers, with the first one opening in October. The international strategy is to open Hollister stores in shopping centers rather than flagship locations. By comparison, Abercrombie & Fitch is looking for high impact locations in Milan, Paris, more in Japan beyond its previously announced Tokyo location, and other important international cities.
– The international business for the company as a whole will accelerate with the majority of store openings beginning in 2010 happening internationally. Executives believe Hollister will have significantly more penetration in Europe and Asia than Abercrombie’s other brands because of its lower price points.
– Domestically, the company will open 67 Hollister stores in 2008 and will move into more “C” and “D” malls. For 2007, the company opened 58 Hollister stores and ended the year with 450 Hollister locations.
– Executives would not say how many total stores they believe Hollister can grow to. One executive said the company is constantly refining that number because “We don’t want to over saturate with the brand as we’ve seen with some of Hollister’s competition.”
– The company is “very pleased” with Hollister’s performance. Given the economic environment, “our business at Hollister at full-price selling is extraordinary.”
– A new body care line at Hollister introduced in the back half of last year was incremental to most purchases. It sees the body care line as a way to fuel organic growth and is rolling it out to all Hollister locations in 2008.
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-Company-wide, Abercrombie & Fitch is investing heavily in its business despite the tough economic environment, from expanding internationally to major infrastructure investments. In 2008, the company will spend $420 million to $425 million on capital expenditures. Analysts asked a lot of questions about the cost structure. Company executives said if the current environment gets worse they will align costs accordingly but they will “avoid resource cuts” that will hurt “long term growth initiatives.”
Hollister fourth quarter financial results: Hollister sales rose 11 percent to $530 million. Same-store sales decreased 2 percent.
Companywide, fourth quarter sales rose 8 percent to $1.2 billion. Same-store sales fell 1 percent. Net income rose 9.3 percent to $216.7 million
Companywide, full year sales rose 13 percent to $3.7 billion. Same store sales decreased 1 percent. Net income rose 12.6 percent to $475.6 million.
