– The company will open 30 to 40 international hollister stores in malls in 2011
Press Release:
New Albany, Ohio, February 16, 2011: Abercrombie & Fitch Co. (NYSE: ANF) today reported unaudited results which reflected net income of $92.6 million and net income per diluted share of $1.03 for the thirteen weeks ended January 29, 2011, compared to a net income of $47.5 million and net income per diluted share of $0.53 for the thirteen weeks ended January 30, 2010.
Excluding store-related asset impairment charges and exit charges associated with domestic store closures, the Company reported non-GAAP net income per diluted share of $1.38 for the thirteen weeks ended January 29, 2011. Excluding a net loss from discontinued operations and store-related asset impairment charges, the Company reported non-GAAP net income per diluted share of $0.91 for the thirteen weeks ended January 30, 2010.
The Company also reported net income of $150.3 million and net income per diluted share of $1.67 for the fifty-two weeks ended January 29, 2011, compared to net income of $0.3 million and net income per diluted share of $0.00 for the fifty-two weeks ended January 30, 2010.
Excluding store-related asset impairment charges and exit charges associated with domestic store closures, the Company reported non-GAAP net income per diluted share of $2.05 for the fifty-two weeks ended January 29, 2011. Excluding a net loss from discontinued operations and store-related asset impairment charges, the Company reported non-GAAP net income per diluted share of $1.12 for the fifty-two weeks ended January 30, 2010.
A reconciliation of net income per diluted share on a GAAP basis to net income per diluted share on a non-GAAP basis is included in a table accompanying the Condensed Consolidated financial statements included with this release.
Fourth Quarter Sales Highlights
Total Company net sales, including direct-to-consumer net sales, increased 23% to $1.149 billion
Comparable store sales increased 13%
Total Company direct-to-consumer net merchandise sales increased 43% to $133.4 million
Total Company domestic net sales, including direct-to-consumer net sales, increased 16% to $919.1 million
Total Company international net sales, including direct-to-consumer net sales, increased 61% to $230.3 million
Abercrombie & Fitch net sales of $469.8 million; Abercrombie & Fitch comparable store sales increased 13%
abercrombie kids net sales of $124.9 million; abercrombie kids comparable store sales increased 9%
Hollister Co. net sales of $539.9 million; Hollister Co. comparable store sales increased 13%
Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said:
“We are very pleased with our fourth quarter results. We finished the year with strong domestic sales growth and continued to see very strong results in Europe. 2010 was a year in which we exceeded our objectives in terms of sales, operating income and earnings per share. We did this while continuing to invest for the future and to build our organization to capitalize on the huge opportunities we see ahead. There are challenges ahead, but we feel very confident in the momentum of our business and the global power of our iconic brands.”
Fourth Quarter and Fiscal Year 2010 Financial Results
Net sales for the thirteen weeks ended January 29, 2011 increased 23% to $1.149 billion from $936.0 million for the thirteen weeks ended January 30, 2010. Total Company fourth quarter comparable store sales increased 13%. Total Company direct-to-consumer net merchandise sales increased 43% to $133.4 million for the thirteen week period ended January 29, 2011. For the fifty-two week fiscal year ended January 29, 2011, the Company reported a net sales increase of 18% to $3.47 billion from $2.93 billion for the fifty-two week fiscal year ended January 30, 2010. Fiscal 2010 total Company comparable store sales increased 7%.Total Company direct-to-consumer net merchandise sales increased 41% to $352.5 million for the fifty-two week fiscal year ended January 29, 2011, compared to the fifty-two week fiscal year ended January 30, 2010.
The gross profit rate for the fourth quarter was 63.6%, approximately flat to last year’s fourth quarter gross profit rate. For Fiscal 2010, the gross profit rate was 63.8% versus 64.3% last year.
Stores and distribution expense for the fourth quarter was $485.5 million, or 42.2% of net sales, and included store-related asset impairment charges of $48.4 million, or 4.2% of net sales, and store closure charges of $4.0 million, or 0.3% of net sales. Stores and distribution expense for the fourth quarter of last year was $414.0, or 44.2% of net sales, and included store-related asset impairment charges of $33.2 million, or 3.5% of net sales. The decrease in the stores and distribution expense rate was primarily driven by lower store occupancy costs and payroll costs as a percentage of net sales. For Fiscal 2010, stores and distribution expense, as a percentage of net sales, decreased to 45.8% versus 48.7% last year.
Marketing, general and administrative expense for the fourth quarter was $106.4 million, a 15% increase compared to $92.4 million during the same period last year. The increase in marketing, general and administrative expense was primarily due to increases in compensation and benefits, including incentive and equity compensation, legal reserves, and asset write-offs. For Fiscal 2010, marketing, general and administrative expense was $400.8 million compared to $353.3 million last year, a 13% increase.
The effective tax rate for continuing operations for the fourth quarter was 35.5% compared to 35.3% during the same period last year. For Fiscal 2010, the effective tax rate for continuing operations was 34.3% compared to 33.9% last year.
Net income was $92.6 million and net income per diluted share was $1.03 for the thirteen weeks ended January 29, 2011, compared to a net income of $47.5 million and net income per diluted share of $0.53 for comparable period last year. The results for the thirteen weeks ended January 29, 2011 included store-related asset impairment charges of $0.33 per diluted share and store closure charges of $0.03 per diluted share. The results for the thirteen weeks ended January 30, 2010 included store-related asset impairment charges of $0.23 per diluted share and a net loss from discontinued operations of $0.15 per diluted share. For Fiscal 2010, net income was $150.3 million and net income per diluted share was $1.67, compared to net income of $0.3 million and net income per diluted share of $0.00 for the comparable period last year. The results for the fifty-two weeks ended January 29, 2011 included store-related asset impairment charges of $0.34 per diluted share and store closure charges of $0.03 per diluted share. The results of the fifty-two weeks ended January 30, 2010 included store-related asset impairment charges of $0.23 per diluted share and a net loss from discontinued operations of $0.89 per diluted share.
The Company ended the fourth quarter of Fiscal 2010 with $826.4 million in cash and cash equivalents, borrowings under the credit agreement of $43.8 million and outstanding letters of credit of $2.9 million, compared to $670.0 million in cash and cash equivalents, borrowings under the credit agreement of $50.9 million and outstanding letters of credit of $50.0 million at the comparable point last year.
During the fourth quarter of Fiscal 2010, the Company repurchased approximately 0.9 million shares of its common stock at an aggregate cost of approximately $47.0 million. During Fiscal 2010, the Company repurchased approximately 1.6 million shares of its common stock at an aggregate cost of approximately $76.2 million. As of January 29, 2011, the Company had approximately 9.8 million remaining shares available for purchase under its publicly announced stock repurchase authorizations.
Fiscal 2010 total capital expenditures were $161 million, which consisted of approximately $118 million for new stores, store refreshes and remodels, and $43 million related to information technology, distribution center and other home office projects.
During Fiscal 2010, the Company opened 36 new stores, 12 domestically and 24 internationally, and closed 64 stores. A summary of store openings and closings for the thirteen and fifty-two week periods ended January 29, 2011 is included with the financial statement schedules following this release.
2011 Outlook
In Fiscal 2011, the Company expects to open international Abercrombie & Fitch flagship stores in Paris, Madrid, Dusseldorf, Brussels, Dublin and Singapore. The Dusseldorf location will also include an abercrombie kids store. In addition the Company expects to open 30 to 40 international mall-based Hollister stores, primarily in the latter part of the year. The Company expects a minimal number of domestic store openings in 2011. In addition, the Company continues to expect to close approximately 50 domestic stores during Fiscal 2011, primarily at the end of 2011 through natural lease expirations.
During the fourth quarter of Fiscal 2010, the Company commenced the consolidation of its two domestic distribution centers. The consolidation will facilitate the potential sale of the second distribution center and result in reduced distribution costs upon completion of the consolidation, which is expected to be by mid-2012. The Company expects to incur approximately $26 million in capital expenditures associated with the consolidation, of which approximately $19 million will occur in 2011 and to incur $28 million or slightly higher in accelerated depreciation charges, of which approximately $4 million per quarter will be recognized in 2011.
Based on current new store plans and other planned expenditures, the Company expects total capital expenditures for 2011 to be approximately $300 million, predominately related to new stores, store refreshes and remodels.
Other Developments
On February 15, 2011, the Board of Directors declared a quarterly cash dividend of $0.175 per share on the Class A Common Stock of Abercrombie & Fitch Co. payable on March 15, 2011 to shareholders of record at the close of business on February 25, 2011.
An investor presentation of fourth quarter results will be available in the “Investors” section of the Company’s website at www.abercrombie.com at approximately 8:00 AM, Eastern Time, today.
At the end of Fiscal 2010, the Company operated a total of 1,069 stores. The Company operated 316 Abercrombie & Fitch stores, 181 abercrombie kids stores, 502 Hollister Co. stores and 18 Gilly Hicks stores in the United States. The Company also operated nine Abercrombie & Fitch stores, four abercrombie kids stores, 38 Hollister Co. stores and one Gilly Hicks store internationally. The Company operates e-commerce websites at www.abercrombie.com, www.abercrombiekids.com, www.hollisterco.com and www.gillyhicks.com.
