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09 Earnings Call Transcript

November
12

09 Earnings Call Transcript,
http://www.eco-liner.it/?p=14678

(Operator Instructions) Welcome to the Abercrombie Fitch Fourth Quarter Earnings Results Conference Call,
http://news.doddleme.com/. At this time I would like to turn the conference over to the Chief Financial Officer Mr. Jonathan Ramsden.

Welcome to our Fourth Quarter Earnings Call. Earlier this morning we released our fourth quarter sales and earnings,
http://www.dynaflow.com/, balance sheet, income statement and an updated financial history. Please feel free to reference these materials which are available on our website.

Before we begin I remind you that any forward looking statements we may make today are subject to the safe harbor statement found in our SEC filings. Today’s earnings call will be limited to one hour. We will begin the call with a few brief remarks from Mike Jeffries,
http://www.julieshoplingerie.com/post-nasal-drip-and-allergies.html, followed by a review of the financial performance for the quarter from Brian Logan and myself. After our prepared comments we will be available to take your questions for as long as time permits. Please limit yourself to one question so that we can speak with any many callers as possible.

We believe the fourth quarter 2008 will go down in history as one of the biggest retail nightmares. It certainly will for me. We saw malls dominated by promotional activity, consumers who continued to show reluctance to spend, especially for premium brands and unprecedented volatility in the economy. In this context,
http://www.tonycrispincarpentry.co.uk/2015/11/how-to-know-what-size-fitted-cap-to-wear/, particularly given our position as an aspirational brand we are satisfied with our results for the quarter.

We reacted to the environment by cutting back on expenses. We used mark downs to clear through seasonal inventory. We reduced capital expenditures by scaling back on our domestic expansion and ended with a strong cash position. Most importantly, we executed our strategy in a way that enabled us to protect our brands.

As a result of these actions, comparable store sales,
http://books.lohudblogs.com/?p=1823, ending inventory levels, and our earnings per share,
http://www.jokesz.com/2015/11/shirt-for-easy-packing/, excluding the effect of one time items, were favorable to the guidance we provided in November. Jonathan and Brian will provide more information on our financial results in a moment.

As we look toward 2009 I want to make a number of points about how we are going to manage our business,
http://blog.shangani.co.uk/.

1) We’re going to protect the brands,
http://www.manoteises.lt/?p=8699.

2) We’re going to preserve cash,
http://gabriel.cetac.se/how-to-fade-t/.

3) We’re going to push international growth,
http://www.hotindienews.com/?p=46909.

All of this in a seasoned disciplined and controlled way,
http://kosmos2012.hu-berlin.de/usuario-discusi/.

First,
http://technitya.com/1960s-fun-lovin-criminals/, we remain committed to protecting our brands, the cornerstone of a successful and profitable business model and therefore vital to long term shareholder value. Our commitment to providing trend right,
http://www.tonycrispincarpentry.co.uk/2015/11/media-musings-blog-archive-reporting-on-qatar-and-the-2022-fifa-world-cup-corruption-scandal/, high quality merchandise has never been stronger than it is today. We will continue to push forward on improved quality even as others remove quality from their product. We constantly obsess about discovering what is next and will continue to improve on our ability to offer a compelling product assortment.

Second, we will preserve cash. We remain committed to managing our operating expenses. We have already undertaken a number of cost saving initiatives and will continue to look for additional opportunities. These efforts are directed toward insuring we are operating in the most efficient and effective manner. We will continue to be mindful of our capital expenditures and manage them for the seasoned and disciplined approach.

Lastly, we continued to be encouraged with the results of our international expansion and are moving forward with our plans to bring our brands to the rest of the world. The Abercrombie Fitch flagship performance continues to be phenomenal. We anxiously await the opening of additional flagships in the second half of 2009 and the Hollister SoHo flagship this summer.

The Hollister UK mall based stores continue to outperform our expectations and we believe we have opportunity to grow that concept this year. We will continue to approach our international expansion with the discipline that the current environment requires and we’ll proceed at a pace with which we feel comfortable. Having said all of this,
http://thebluewatergroup.com.au/2015/11/100-things-to-do-this-summer-in-cleveland/, we will continue to focus on our long term objectives while seeking to maintain flexibility to respond to market conditions as we clearly demonstrated in the fourth quarter.

I want to tell you that during this time of unprecedented turmoil I am completely confident in our approach and our ability to manage and control this business. Our brands are some of the most sought after in all of retail, we have one of the strongest balance sheets in the industry and the passion and energy of the ANF associates is unmatched. With these things in mind we will continue to strengthen our brands and be well positioned in more promising times.

With that I will hand the call back to Jonathan but will be available to answer your questions later,
http://vorticedance.com/?p=9156.

While the current environment is proving to be extremely volatile, as Mike said,
http://www.julieshoplingerie.com/how-to-be-a-good-little-league-baseball-coach.html, we’re satisfied with our ability to manage the business through the past quarter and provide results slightly above estimates provided in November,
http://toppmotet.se/?p=15930, excluding the effect of the impairment and tax charges.

Net sales for the quarter decreased to $998 million, our total comparable stores decline of 25% was slightly better than we had anticipated driven by the combination of stronger post Christmas business,
http://www.mmi-groupe.tn/?p=4407, a trend that has increased in recent years and season ending clearance mark downs. Our gross profit rate in the fourth quarter was 64.4% down 280 basis points from last year as a result of higher mark down rate.

We implemented cost reductions during the quarter which resulted in total operating expenses excluding the asset impairment charge in line with 2007. Excluding the asset impairment and tax charges net income per diluted share was $1,
http://www.sysnatura.com/budget-fixie-bikes-for-sale/.10 and somewhat above the high end of the range we provided in November,
http://colespeace.com/.

As we move forward into 2009 from a financial standpoint we will be focusing on the following; firstly, IMU and gross margin. Secondly,
http://www.dynaflow.com/, continuing with the rigorous review of all of our operating expenses both to achieve absolute expense reductions and to have a more flexible cost base. These efforts will be ongoing in 2009 and beyond. Thirdly, restoring our historical alignment of inventory with sales.

Lastly,
http://skoly.disod.cz/?p=494, as we execute new deals in connection with our international expansion we want to ensure we are getting the best deals we possibly can taking advantage of the strength of our brands,
http://unions-whoswho.eu/post-swimmers-learn-from-top-sport-stars-in-pool.html, very strong initial reaction to our openings in the UK and favorable conditions from a real estate perspective. In other words, our focus is going to be on getting the best possible deals done rather than on maximizing the number of deals. In all of the above we’re going to take a conservative view with market conditions and not rely on a strong economic recovery to restore our operating margin.

Coming on to our specific plans for new store openings in 2009,
http://history.upd.edu.ph/news/heart-rate-during-swimming/, our store growth for the year will be focused on international opportunities. Based on current firm lease commitments we expect total capital expenditures to be in the range of $165 to $175 million including $45 to $50 million for IT, distribution center and home office projects,
http://www.bshearing.com/???/3886/, and $120 to $125 million related to new stores, store refreshes and remodels.

Domestically, in addition to the Hollister flagship in SoHo we have firm commitments to open nine stores in 2009. These commitments include two Abercrombie stores, four Hollister stores, two Gilly Hicks stores, one outlet store. Internationally we have existing firm commitments to open two mall based UK Hollister stores in addition to the three already opened and one Canadian Abercrombie store.

Due to the success of introducing Hollister in the UK we are in active discussions with regard to additional store openings in Europe. Our current best estimate is that we will open approximately 10 additional stores by the end of 2009,
http://www.coolblogtricks.net/. We remain on track to open Abercrombie Fitch and Abercrombie flagships in Milan in November and an Abercrombie Fitch flagship in Tokyo in December. At this point we expect that the A flagship in Copenhagen and the Abercrombie flagship in New York will not open until 2010,
http://blog.shangani.co.uk/.

With regard to operating expenses, as we have previously stated we have implemented a significant number of cost reduction initiatives in both stores and the home office. With regard to MG specifically we are confident that these initiatives will result in expenses below 2008 levels. These expense reduction efforts will be ongoing and will be responsive to the overall sales trend of the business.

We expect that a difficult selling environment will persist throughout 2009 due to the current economic conditions and in particular their impact on sales trends we believe that providing specific EPS guidance at this point would be to borrow a phrase from a fellow retailer, "An exercise in false precision." We will continue to provide monthly sales reports as in the past.

Now to Brian who will provide the more detailed update on our fourth quarter financial performance.

Fiscal 2008 fourth quarter net sales for the 13 weeks ended January 31, 2009,
http://blog.doethicalbusiness.com/?p=32811, decreased 19% to $998 million from $1.23 billion for the 13 weeks ended February 2, 2008. Fourth quarter direct to consumer net sales decreased 12% to $95.1 million. Total company comparable store sales decreased 25%,
http://vorticedance.com/?p=9156, average transaction value per store decreased 25% and average transaction value decreased 1% compared to last year.

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