Editor’s note: ANF’s stock is up nearly 28% in trading this morning after it released better than expected results and international sales improved.
Press Release:
ABERCROMBIE & FITCH REPORTS THIRD QUARTER 2012 RESULTS SALES INCREASE 9% AND NET INCOME INCREASES 40% BOARD OF DIRECTORS DECLARES QUARTERLY DIVIDEND OF $0.175
New Albany, Ohio, November 14, 2012: Abercrombie & Fitch Co. (ANF) today reported unaudited results which reflected net income of $71.5 million and net income per diluted share of $0.87 for the thirteen weeks ended October 27, 2012, compared to net income of $50.9 million and net income per diluted share of $0.57 for the thirteen weeks ended October 29, 2011.
Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said:
“These significantly improved financial results reflect progress on several fronts over the past quarter. Our US chain store business posted healthy growth on top of a strong quarter a year ago, and we saw sequential trend improvement in our international business. Our principal focus remains to execute against our key strategic initiatives to leverage our iconic brands and to continue to be judicious in our use of our shareholders` capital to drive long-term shareholder value.”
Third Quarter Summary
Net sales for the thirteen weeks ended October 27, 2012 increased 9% to $1.170 billion from $1.076 billion for the thirteen weeks ended October 29, 2011. Total U.S. sales, including direct-to-consumer sales, were approximately flat at $818.6 million. Total international sales, including direct-to-consumer sales, increased 37% to $351.1 million. Total Company direct-to-consumer sales, including shipping and handling, increased 20% to $158.3 million.
Total comparable store sales for the quarter decreased 3% relative to last year. By brand, comparable store sales decreased 4% for Abercrombie & Fitch, 3% for abercrombie kids, and 1% for Hollister Co. Total sales by brand were $440.0 million for Abercrombie & Fitch, $99.8 million for abercrombie kids and $602.5 million for Hollister Co.
Within direct-to-consumer, including shipping and handling revenues, US sales were up 15% and international sales were up 31%.
The gross profit rate for the third quarter was 62.5%, 240 basis points higher than last year`s third quarter gross profit rate. The increase in the gross profit rate was driven by a decrease in average unit cost and an international mix benefit, partially off-set by a slight decrease in average unit retail and an adverse effect of exchange rates.
Stores and distribution expense, as a percentage of net sales, decreased to 42.5% from 42.9% for the third quarter of last year. The decrease in the stores and distribution rate was primarily the result of lower store pre-opening costs. In addition, prior year stores and distribution expense included approximately $4 million of accelerated depreciation related to the consolidation of the distribution centers.
Marketing, general and administrative expense for the third quarter was $123.4 million, compared to $107.8 million during the same period last year. The increase in marketing, general and administrative expense was due to increases in marketing, incentive compensation related expenses, IT and other expenses.
The effective tax rate for continuing operations for the thirteen weeks ended October 27, 2012 was 35.5%, compared to 35.8% for the prior year comparable period.
Net income was $71.5 million and net income per diluted share was $0.87 for the thirteen weeks ended October 27, 2012, compared to net income of $50.9 million and net income per diluted share of $0.57 for the comparable period last year.
The Company ended the third quarter of fiscal 2012 with approximately $349.7 million in cash and cash equivalents, $19.9 million in current marketable securities and $60.0 million in borrowings under the revolving credit agreement.
During the third quarter of Fiscal 2012, the Company repurchased 3.0 million shares of its common stock at an aggregate cost of approximately $104.3 million. As of October 27, 2012, the Company had approximately 19.9 million remaining shares available for purchase under its publicly announced stock repurchase authorizations.
During the quarter the Company opened an Abercrombie & Fitch flagship store in Hong Kong, a combined Abercrombie & Fitch and abercrombie kids store in Munich and nine international Hollister Co. chain stores.
Subsequent to quarter end, the Company has opened an Abercrombie & Fitch store in Dublin.
2012 Outlook
Based on having exceeded its objectives for the third quarter, the Company is now projecting full year diluted earnings per share of approximately $2.85 to $3.00. This projection assumes a mid single digit percentage decrease in comparable store sales for the fourth quarter and a slightly higher gross margin rate for the quarter relative to the year-to-date rate. The projected diluted earnings per share guidance does not include the impact of potential impairment charges or other real estate charges. In addition, the projected earnings per share guidance assumes a full year diluted weighted average share count of approximately 83.1 million shares and does not include the impact of potential share repurchases in the fourth quarter.
Other Developments
On November 13, 2012, 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 December 11, 2012 to shareholders of record at the close of business on November 26, 2012.
At the end of the third quarter, the Company operated a total of 1,067 stores. The Company operated 278 Abercrombie & Fitch stores, 154 abercrombie kids stores, 486 Hollister Co. stores and 18 Gilly Hicks stores in the United States. The Company operated 17 Abercrombie & Fitch stores, six abercrombie kids stores, 101 Hollister Co. stores and seven Gilly Hicks stores internationally. The Company operates e-commerce websites at www.abercrombie.com, www.abercrombiekids.com, www.hollisterco.com and www.gillyhicks.com.
