Abercrombie & Fitch Company (ANF)

ANF 
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Abercrombie & Fitch Co. (ANF)

F2Q09 Earnings Call

August 14, 2009 8:30 am ET

Executives

Eric Cerny - Manager of Investor Relations

Mike Jeffries – Chairman and Chief Executive Officer

Jonathan Ramsden - Chief Financial Officer

Brian Logan – Principal Accounting Officer

Analysts

Michelle Tan - Goldman Sachs

Christine Chen - Needham & Company

Janet Kloppenburg - JJK Research

Jeff Klinefelter - Piper Jaffray

Edward Yruma - Keybanc Capital Markets

Linda Tsai – MKM Partners

Paul Lejeuz - Credit Suisse

Kimberly Greenberger – Citigroup

Adrienne Tennant - Friedman, Billings, Ramsey

Jennifer Black - Jennifer Black & Associates

Liz Dunn - Thomas Weisel

Dana Telsey - Telsey Advisory Group

Laura Champine - Cowen & Company

Stacy Peck - SP Research

Jeff Black – Barclays Capital

Richard Jaffe - Stifel Nicolaus

Randy Konick - Jefferies & Company

Lorraine Hutchison – BAS-ML

Eric Beder - Brean Murray

Marni Shapiro – The Retail Tracker

Josh Schwartz - Flatbush Watermill LLC

Roxanne Meyer - UBS

Howard Tubin - RBC Capital Markets

Magna Patua - Marquet

Presentation

Operator

Good day, everyone and welcome to the Abercrombie & Fitch second quarter earnings results conference call. (Operator Instructions) At this time, I would like to turn the conference over to Mr. Eric Cerny. Mr. Cerny, please go ahead, sir.

Eric Cerny

Good morning and welcome to our second quarter earnings call. Earlier this morning we released our second quarter sales and earnings, balance sheet, statement of operations and an updated financial history. Please feel free to reference these materials available on our website.

This call is being recorded and the replay may be accessed through the Internet at Abercrombie.com.

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, followed by a review of the financial performance for the quarter from Jonathan Ramsden and Brian Logan. 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 as many callers as possible. Now, to Mike.

Mike Jeffries

Good morning, everyone. Thank you for joining us today. We continue to be confronted with very challenging conditions during the second quarter. We believe we are doing the right things to address those challenges and improve our domestic business. In the meantime, we remain very encouraged by our prospects for international growth.

As a company that stands for optimism, confidence, and aspiration, we sell the best of America and we think that the world has a growing appreciation of these values. However, consumer spending patterns domestically continue to be dictated by cost and value propositions and this is clearly a headwind for our premium brands.

We find ourselves working to effect the things that are within our control and remain confident that we will be better positioned as a result of our actions to take advantage of the eventual turnaround.

Jonathan and Brian will provide more detail on our financial results in a moment but I would like to share with you some of the key points regarding our strategy, as well as some of the things we are seeing today that allow us to look to the future with optimism.

First, as many of you have heard me say before, our future is tied to the international expansion of our brands. We increasingly see this opportunity, which will drive the future growth and profitability of our business, pointing in a positive direction. Our performance in the U.K. proves that there is a strong demand for our brands overseas. The Abercrombie & Fitch flagship in London, having opened its doors two-and-a-half years ago, continues to comp significantly positively. We currently have five Hollister mall-based stores in the U.K. and are extremely pleased with the reception the brand has received as we have opened each location. We are clearly offering the international customer a shopping experience unlike anything they currently have.

Second, we feel very good about the progress we have made on our product offering. We are always pushing ourselves to offer classic, casual, trend right exceptional quality product but have admittedly missed some of the fashion opportunities that drove the business in the spring. We feel like we have corrected those fashion misses and have been increasingly adding fashion elements to the assortment throughout the quarter in preparation for back-to-school and Christmas shopping, particularly for the female business.

We’ve heard the reaction from many of you as well as our store associates and our customers. You’ve liked the newness and the variety we have added to our assortments.

Third, as I mentioned to you last quarter, we recognize price is an important component of our business model. We are planning to deliver greater reductions in AUR for the fall season but will continue to review pricing on an ongoing basis. For the back to school and Christmas shopping periods, you will continue to see us offer a balance of full-price fashion product and specialty priced product throughout the store. For spring 2010, we are sourcing into lower product costs to help support lower AURs. Most importantly, we will do this while protecting quality.

Lastly, it was great to see so many of you at the epic Hollister opening in Soho in July. For those of you not able to make it, I encourage you to pay a visit to the store. We believe it is truly a unique experience and expect it to be a tourist destination for the Hollister customer and to support our international Hollister rollout.

Read the rest of this transcript for free on seekingalpha.com