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Abercrombie & Fitch Co. (ANF)
F1Q10 Earnings Call
May 18, 2010 8:30 am ET
Eric Cerny – Manager of Investor Relations
Jonathan Ramsden - Chief Financial Officer
Mike Jeffries – Chairman and Chief Executive Officer
Brian Logan – Principal Accounting Officer
Dana Telsey - Telsey Advisory Group
Brian Tunick – JP Morgan
Barbara Wycoff – Jesup & Lamont
Richard Jaffe – Stifel Nicolaus & Company
Michelle Clark – Morgan Stanley
Jeff Klinefelter - Piper Jaffray
Jeff Black – Barclays Capital
Edward Yruma – Key Banc
Liz Dunn - Thomas Weisel
Christine Chen - Needham & Company
Adrienne Tennant - Friedman, Billings, Ramsey
John Morris – Bank of Montreal
Kimberly Greenberger - Citigroup
Janet Kloppenburg - JJK Research
Randy Konik – Jefferies & Company
Paul Lejeuz - Credit Suisse
Michele Tan – Goldman Sachs
Lorraine Hutchison – Bank of America-Merrill Lynch
Dorothy Lakner – Caris & Company
Previous Statements by ANF
» Abercrombie & Fitch Co. F4Q09 (Qtr End 01/30/10) Earnings Call Transcript
» Abercrombie & Fitch Co. F3Q10 (Qtr End 10/31/09) Earnings Call Transcript
» Abercrombie & Fitch Co. F2Q09 (Qtr End 8/1/09) Earnings Call Transcript
Thank you. Good morning and welcome to our first quarter earnings call. Earlier this morning we released our first 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 under the investor relations section.
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 any many callers as possible.
As a reminder, the after-tax operating results for Ruehl for 2009 and prior periods are now included in discontinued operations on the income statement and comparisons to prior-year generally exclude Ruehl.
Now to Mike.
Good morning guys. Thank you for joining us. Looking back on the first quarter I would summarize it as one in which we continued to focus on the key long-term drivers of our business that we laid out in our least earnings call. We are pleased with the progress we have made but there is still much work to be done.
First, we are pleased with the overall reported sales growth of 14% for the quarter and particularly with the international and direct-to-consumer sales growth within that figure. We continue to be very focused on achieving sustainable, profitable growth in both our domestic and international businesses. Internationally results for the quarter were very encouraging. We opened three new Hollister mall-based stores in the U.K.; in Aberdeen, Cardiff and New Castle and all three are doing very well and exceeding our projections. The three Hollister U.K. stores in the comp base each comped positively for the quarter.
Domestically we have taken steps in the right direction and have seen some progress evidenced by our overall domestic business which was positive for the quarter including Hollister. The continued outperformance of the Abercrombie & Fitch Tourist and high volume stores domestically is a significant consideration in our review of the domestic footprint of the brand.
Coming back to international and growth opportunity there, by the end of the year we expect to have 34 Hollister stores in Europe and we are working very hard to increase the pace of international expansion. We have been adding resources where we need to and are at various stages of laying the groundwork in more than 10 additional countries. Our intent is to ensure we can keep a steady pipeline of new openings and we remain very excited about the opportunities we see ahead of us.
We are balancing this accelerated pace with ensuring we do not over-store particular regions or sacrifice quality and end up in locations where we don’t belong. We want to ensure the locations we choose make sense from a brand perspective, a location perspective and of course a financial perspective. We have made some tough decisions this quarter to pull back on a small number of locations that do not meet all of these criteria and we will be very disciplined in how we approach this. We will not sacrifice quality for a short-term sales opportunity if it doesn’t make sense for us in the long run.
Turning to Abercrombie & Fitch we announced this morning we will be opening a flagship in Madrid in 2011. Beyond that, we are looking at around 15 additional flagship opportunities in Europe and Asia through 2012. Again, we will be diligent and disciplined in how we approach this but we are very excited about the opportunities ahead of us. We also announced today we will open our first international Gilly Hicks store in London later this year. This will be a great opportunity for us to see if the international reaction to the Gilly Hicks brand is as strong as the reaction we have seen for A&F and Hollister.
With that I will hand the call over to Jonathan.
Thanks Mike and good morning everyone. For the first quarter the company’s reported net sales increased 14% to $687.8 million and comp store sales increased 1%. Our direct to consumer business was up 42% for the quarter and new international sales were the primary drivers of our reported sales growth for the quarter.