Abercrombie & Fitch Company (ANF)

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Abercrombie & Fitch Co. (ANF)

F3Q10 Earnings Call

November 13, 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

Christine Chen - Needham & Company

Michelle Tan - Goldman Sachs

Jeff Klinefelter - Piper Jaffray

Jeff Black – Barclays Capital

Janet Kloppenburg - JJK Research

Adrienne Tennant - Friedman, Billings, Ramsey

Barbara Wyckoff - Jesup & Lamont

Randy Konick - Jefferies & Company

Paul Lejeuz - Credit Suisse

Edward Yruma - Keybanc Capital Markets

Robert Samuels - Oppenheimer

Jennifer Black - Jennifer Black & Associates

Dana Telsey - Telsey Advisory Group

Robin Murchison - Suntrust

Stacy Peck - SP Research

Michelle Clark - Morgan Stanley

David Glick - Buckingham Research

Presentation

Operator

Good day, everyone and welcome to the Abercrombie & Fitch third 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 third quarter earnings call. Earlier this morning we released our third quarter sales and earnings, balance sheet, income statement, 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.

In addition, any comments made during this call with regard to fourth quarter expectations do not reflect the anticipated discontinued operations accounting for RUEHL.

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. We will talk in more detail about our results for the quarter in a few moments but I would like to begin with what I believe were the highlights for the quarter. In many respects, these had little impact on the reported numbers but are significant to the future of our business.

We have said for some time that the future of our business is tied to international growth. On October 29th, we opened our second international A&F flagship store and our first in a non-English speaking country. Those of you who were there that day or had a chance to visit subsequently have seen first hand the reaction the store has generated. As is the case on Fifth Avenue and in London, people in Milan are telling us they love our brands and our store experience.

Not to be overshadowed by the flagship opening, on the same day we opened a Hollister mall based store in Belfast. This was our seventh Hollister store in the U.K. On an annualized basis, we expect those seven stores to be among the top 10 performing Hollister stores by volume as well as being very profitable.

We will open additional Hollister locations in Frankfurt and Rome before Christmas and remain on track to open our Abercrombie & Fitch Tokyo flagship on December 15th.

As we look to the future, we are working toward a rate of international Hollister store openings in 2010 and 2011 significantly accelerated from 2009.

Importantly, we do not underestimate the work that needs to be done to accomplish our rollout strategy but I am confident that we have the team in place that can make it happen. The results we have seen to date continue to give us very strong encouragement that this is the right strategy to pursue.

We are also mindful that our international and domestic strategies and positioning are related, so while we are moving to a more offensive footing on several fronts domestically, we will do this while sticking to our strategy of protecting the brands for the long-term.

When I refer to being more on the offensive domestically, I am speaking of several things. First, having been in a very conservative mode for most of the past year, we are working toward being in a stronger inventory position for the spring. We know that our stores have looked light during the past quarter and we are working to correct this.

Second, we are working on marketing initiatives including the area of social media that will enable us to better communicate and connect with our customers.

Third, we will improve our ability to offer specially targeted attractive price points particularly in Hollister in response to an environment that continues to be very value and deal oriented. Most importantly, we will do this in our own handwriting. Our business model was not built on running a promotional business and never will be.

Fourth, we continue to look very hard at our domestic store footprint, particularly Abercrombie & Fitch.

Finally, as we have always done, we will continue to challenge ourselves season after season to improve our product offering. Throughout the summer and back to school seasons, we believe we made huge strides in offering more compelling fashion product alongside our basic categories.

We are mindful that this business is a balance of basics and fashion and are constantly looking for new trends that can get -- that we can interpret in our own handwriting. I encourage you to get into our stores. We look good for Christmas.

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