Casual apparel retailer,
Abercrombie & Fitch Co.
) reported an outstanding financial result for the fourth quarter
of fiscal 2012 with earnings surging over 97% year over year to
$2.21 per share, substantially beating the Zacks Consensus
Estimate of $1.93.
The robust quarterly performance was primarily driven by
strong top-line growth along with improved margins. The earnings
included the effect of change of inventory valuation method to
cost method from retail method.
Summary of the Quarter
Driven by robust sales performance in the international
market, total sales for the company escalated 11% to $1.469
billion from $1.329 billion in the comparable prior-year period.
However, the quarterly revenue missed the Zacks Consensus
Estimate of $1.481 billion.
The increase in total sales reflects robust growth of 34% in
international business (including direct-to-consumer sales) to
$392.2 million and total domestic sales (including
direct-to-consumer sales) increasing 1% to $976.4 million.
Overall, direct-to-consumer sales jumped 26% to $266.4 million in
the quarter under review, signifying continued strength in the
Including direct-to-consumer sales, the company's total
comparable-store sales (comps) inched down 1%, primarily due to a
fall of 4% in comparable-store sales, partially offset by an
increase of 17% in comparable direct-to-consumer sales.
In the quarter, gross margin improved 390 basis points (bps)
to 63.4%. The expansion in gross margin was primarily driven by
reduced average unit cost.
Stores and distribution expenses, as a percentage of sales,
increased 110 bps to 38.8% compared with 37.7% in the prior-year
period, primarily due to higher direct-to-consumer expenses.
Moreover, marketing, general and administrative expenses
escalated by $10.7 million to $122.3 million due to higher
compensation charges along with enhanced marketing, travelling
and IT expenses.
Abercrombie ended fiscal 2012 with cash and cash equivalents
of $645.7 million and shareholders' equity of $1.818 billion. As
of Feb 2, 2013, inventories were approximately $427.0 million
under the cost method.
During the fiscal, the company spent approximately $321.7
million toward repurchasing 7.5 million shares of its common
stock. The company now has the total authorization to buyback
18.7 million additional shares under its share repurchase
Further, on Feb 21, 2013, the company's board of directors
announced a quarterly cash dividend of 20 cents per share payable
on Mar 19, 2013 to shareholders of record as of Mar 4, 2013. The
recently declared dividend represents an increase of 14.3% from
last paid dividend of 17.5 cents per share on Dec 11, 2012.
During the fiscal, the company opened 3 new domestic and 40
international stores, while it shuttered 47 domestic stores at
The company ended the fiscal with a total of 1,051 stores,
including 285 Abercrombie & Fitch stores, 150 abercrombie
kids stores, 589 Hollister Co. stores and 27 Gilly Hicks
Sneak Peek into Fiscal 2013
Based on strong sales trends, Abercrombie expects its fiscal
2013 earnings to come in the range of $3.35-$3.45 per share,
under the cost method of inventory valuation. During the fiscal
year, Abercrombie intends to open nearly 20 international
Hollister stores and shut down 40-50 domestic stores. The company
anticipates a capital expenditure of approximately $200.0 million
toward new store openings and other planned expenditure in fiscal
Other Stocks to Consider
Currently, Abercrombie has a Zacks Rank #1 (Buy). Other stocks
worth considering in the apparel retail industry are
Citi Trends, Inc.
American Eagle Outfitters, Inc.
). While Citi Trends and Express hold a Zacks Rank #1 (Strong
Buy), American Eagle has a Zacks Rank #2 (Buy).
AMER EAGLE OUTF (AEO): Free Stock Analysis
ABERCROMBIE (ANF): Free Stock Analysis Report
CITI TRENDS INC (CTRN): Free Stock Analysis
EXPRESS INC (EXPR): Free Stock Analysis
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