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HenryTo
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 Posted: Thu Jan 08, 2009 8:13 am Post subject: Abercrombie & Fitch |
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Following courtesy of Briefing.com. As I discussed in our weekend commentary, I'd continue to stay away from ANF and AEO:
| Quote: | | 8:04AM Abercrombie reports Dec same store sales -24.0% vs -22.9% Briefing.com consensus; says EPS for Q4 will be below previous guidance (ANF) 23.74 : As a result of a charge to tax expense and the expected non-cash impairment charge ($10 mln), co now anticipates that net income per diluted share for the fourth quarter will be significantly below the $1.00 to $1.05 per diluted share guidance previously issued. |
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HenryTo
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HenryTo
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| Posted: Thu Feb 02, 2012 2:32 pm Post subject: |
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Morningstar on ANF's latest business update.
| Quote: | | Abercrombie & Fitch's ANF business update Thursday confirmed our suspicions that the company's $4.75 guidance for 2012 was ambitious and would be difficult to achieve in the cur rent economic climate. We will be lowering our fair value estimate to reflect this information and bring our estimates closer in line to reality. While we expected 2012 to come in much lighter than the company did, with earnings at $4.18 versus the lofty $4.75 projected by the company, management has brought its forecast even lower than that and now expects 2012 earnings per share of $3.50-$3.75. The update on the fourth quarter ended Jan. 31 didn't provide any additional lift to the current year, and in fact is being reported as much weaker than expected, with the stock down more than 10% in premarket trading. While November was strong for the company, the very important European flagship stores, which were expected to be a growth driver for the company longer term, comped negative in the quarter, which we do not find surprising, considering the economic climate and austerity measures many European countries are pursuing. Abercrombie said overall same-store sales were flat during the quarter, driving weaker sales than either we or the consensus expected, and the gross margin eroded 750 basis points, rather than the 450 basis points we expected (the company expected similar third- and fourth-quarter gross margin erosion, which would have been around 450 basis points). While we are disappointed by this update, we aren't necessarily surprised, as we assumed a number of Abercrombie's longer-term goals were more aggressive than we would have liked. From our channel checks, excess inventory at the stores confirmed deep discounting in January, and we fear this might continue into the spring season. We would like to see some stability out of the higher-growth European flagships before we became more positive on the stock. |
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HenryTo
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| Posted: Thu May 19, 2011 2:33 am Post subject: |
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Morningstar on ANF's 1Q earnings:
| Quote: | | Abercrombie & Fitch ANF got off to a strong start to 2011, with first-quarter sales and profitability that exceeded our expectations. As in the past few quarters, international and e-commerce sales stood out, increasing 64% and 32%, respectively. Gross margins, which increased 230 basis points to 65%, were also particularly impressive, especially in light of escalating cotton costs that have weighed on profitability across much of the industry. We plan to make a few adjustments to our model for first-quarter trends, including a modest increase in our fair value estimate. However, we believe the market may be pricing in unrealistic assumptions for Abercrombie, particularly over the next five years, and we find the shares overvalued at present. For the quarter, tota l revenue was up 22% to $837 million, driven by 13% growth in the United States and 64% overseas. By concept, comparable sales at namesake A&F, abercrombie kids, and Hollister were up 8%, 11%, and 11%, respectively. In our view, e-commerce and international expansion will continue to be key growth drivers for 2011, and stabilizing trends in teen unemployment bode well for Abercrombie's domestic operations as well. Although the company will start to lap more difficult comparisons as the year progresses, we continue to view high-single-digit comparable-store sales as a reasonable assumption for 2011. Gross margins were the highlight of the quarter, in our assessment. Management attributed the 230-basis-point increase to a favorable foreign currency impact and a lower average unit cost, the latter of which is in stark contrast to recent commentary from other apparel retailers. However, this was the result of locking in favorable cotton prices last fall, and we do not think thes e trends are sustainable throughout the year, given current cotton cost trends. Abercrombie should be in a position to expand gross margins this year, especially if price increases planned for the third quarter are successful, but we believe the full-year improvement will be much less pronounced than in the first quarter. On the basis of first-quarter results, we believe operating margins are probably on pace to be in the low double digits for the year, a slight increase from our earlier estimates. |
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HenryTo
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| Posted: Wed Apr 06, 2011 1:30 pm Post subject: |
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Morningstar on ANF's investor day:
| Quote: | | We plan to maintain our $54 fair value estimate for Abercrombie & Fitch ANF following the firm's investor day, where management unveiled aggressive and, in our view, ultimately unrealistic long-term revenue and earnings per share projections. Among the company's loftier goals were revenue of $7.5 billion by fiscal 2015 (ending January 2016), more than double the $3.5 billion the company generated last year, and earnings per share of $4.75 by fiscal 2012, compared with consensus estimates of $3.97. Fundamentally, we believe the company has prioritized the right strategies with its ambitious top-line growth plans, including additional flagship and Hollister stores overseas, increased direct-to-consumer penetration, and improved domestic store productivity metrics. However, $7.5 billion in revenue by 2015, which implies a five-year compound annual growth rate in the high teens, strikes us as aggressively optimistic in light of still-persistent headwinds like elevated teen unemployment rates, stagnant wage growth, and rising commodity costs. Additionally, to reach $4.75 per share in earnings by 2012, we believe the company would need to improve operating margins to about 15%, compared with a three-year historical average of 8.3%. Management seemed cautious about hitting this target, in our view, and we continue to forecast low-teen operating margins in 2012 driven by increased operating leverage, supply-chain improvements, and a mix shift toward higher-margin international and e-commerce sales. While we're advocating a wait-and-see stance, our fair value estimate would prove conservative if management achieves its lofty long-term goals. The company achieved nearly a 20% average operating margin over the 10-year period before 2008, so a 15% margin isn't exactly uncharted territory. Assuming midteen top-line growth assumptions and operating margins of just under 15% by 2012, coupled with share-repurchase activity, earnings per share of $4.75 within two years may not be out of the question. Using these assumptions in our discounted cash flow model would yield a fair value estimate around the current market price of $66 per share. If Abercrombie reached its even loftier 2015 top-line objectives, there would probably be even greater upside to our valuation assumptions. That being said, we believe management faces an uphill battle reaching these targets with very little margin for execution errors. |
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HenryTo
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| Posted: Tue Nov 16, 2010 11:52 am Post subject: |
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Morningstar on ANF's 3Q earnings:
| Quote: | | Abercrombie & Fitch's ANF third-quarter results reflected an uptick in store traffic but slightly weaker gross margins, driven by continued price cuts (average unit retail down 11%) in domestic nontourist stores across all three brands. International stores remained a bright spot for the firm; business overseas now accounts for almost 20% of total revenue, a significant achievement since the firm opened its first store abroad in 2006. Results were in line with our projections, and the firm remains on track to meet our fiscal 2010 forecast of midteen top-line growth and a high-single-digit operating margin (up from 4% in 2009). We are maintaining our fair value estimate. Total revenue was up 18.0% to $885.8 million, driven by impressive 87% growth in international sales and a 7% increase in consolidated same-store sales, both of which include direct-to-consumer sales. On a stand-alone basis, direct-to-consumer sales were up 32%. By concept, comparable sales at namesake A&F, abercrombie kids, and Hollister were up 8%, 2% and 7%, respectively. Yet, since unemployment among 16- to 19-year-olds remains high (27.1% as of October), heavy discounts were still insufficient to clear excess inventory in the system (up about 50% from the prior year). Therefore, we expect that the firm will remain promotional during the holiday season. However, we anticipate a modest uptick in demand over the next few years as we believe that Abercrombie will regain favor among brand-obsessed teens as unemployment pressures ease. The operating margin expanded by 250 basis points to 8.8%, thanks to a reduction in store occupancy costs and operating leverage gained, partially offset by lower selling prices (gross margins down 40 basis points). While profitability w ill probably remain pressured by weaker merchandise margins and incremental operating expenses tied to new store openings over the next few quarters, we anticipate that the firm will be able to offset these pressures through cost-reduction initiatives and operating leverage as it builds out its store base overseas. Therefore, we project operating margins can get back to the midteens over the long term. |
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HenryTo
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| Posted: Wed May 19, 2010 11:35 pm Post subject: |
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Morningstar on ANF's 1Q earnings:
| Quote: | | Abercrombie & Fitch's ANF first-quarter results reflect continued pressure in the premium teen apparel market, as unemployment among 16- to 19-year-olds remains high (25.4% as of April). However, strong traffic at the firm's tourist stores and international locations validates our thesis that the brand remains intact, and we believe Abercrombie will regain favor among brand-obsessed teens as unemployment pressures ease. Results were in line with our projections, and we are maintaining our fair value estimate. Total quarterly revenue was up 14.5%, driven by solid sales volume in new international flagship stores, 45% growth in direct-to-consumer sales, and a 1% increase in consolidated same-store sales. Despite the firm's move to modestly trim pricing (by 10%) duri ng the quarter, demand remains tepid. However, in line with our expectations, the international stores remained a bright spot, and we project that expansion abroad will remain a key growth driver in the near term. In 2010, the firm plans to open about 30 international stores and 15 stores in the United States. Given volume pressures, lower selling prices, and a mix shift toward smaller-ticket items in the domestic market, the firm posted an $18.7 million operating loss during the quarter. However, this represents a 270-basis-point operating margin improvement from the year-ago period, driven by lower store occupancy costs this quarter. While margins will probably be pressured by weaker merchandise margins and incremental operating expenses tied to new store openings over the next few quarters, we anticipate that the firm will be able to offset these pressures through cost-reduction initiatives and operating leverage as it builds out its store base overseas. Therefore, we pro ject operating margins will expand to about 10% in 2010 from 4% in 2009. |
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HenryTo
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| Posted: Sun Apr 18, 2010 10:07 am Post subject: |
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ANF's corporate governance and CEO compensation scheme again come under fire:
| Quote: | Abercrombie & Fitch Pays CEO Millions to Stop Flying
By SEAN GREGORY Sean Gregory – Sun Apr 18, 1:05 am ET
Through the Great Recession, few brands struggled as much as Abercrombie & Fitch, the company that sells preppy, casual clothes to teens and young adults. While other retailers were slashing prices to attract consumers, the company was still pushing $90 pants, and stuck to its "aspirational" marketing campaigns featuring half-naked models. The tone-deaf strategy backfired: in 2009, the company netted just $254,000, essentially running at breakeven, compared to a $273 million profit in 2008 (and a $476 million take during the heady days of 2007). Same-store sales were off 23% last year; between the beginning of 2008 and the end of 2009, Abercrombie's stock price fell 56%. While the stock is up 41% in 2010, and same-store sales have ticked up during the current retail rebound, Abercrombie & Fitch is still buried in a deep hole.
So it would make good business sense - or at least just require common sense - for Abercrombie & Fitch chairman and CEO Mike Jeffries, who in 2008 received $71.8 million in total compensation, according to research firm the Corporate Library, to plow some money back into his company. After all, CEOs around the country have taken drastic pay and perk cuts to better fit the tenor of these tough times. For the good of Abercrombie shareholders, and the company's battered image, Jeffries, named one of the five Highest Paid Worst Performers of 2008 by the Corporate Library (his 2009 compensation has yet to be disclosed), is one guy who could use some scaling back. (See TIME's photos of stores that are no more.)
The first paragraph of an April 13 SEC filing suggests that Jeffries is taking a positive step toward that end. According to the filing, no longer will the company provide unlimited payments for the CEO's personal travel on the company jet. Instead, Abercrombie will cap its reimbursements for the CEO's personal travel at $200,000; still a pretty, and unnecessary, perk, but at least it's less egregious than before. In 2008 alone, Jeffries' personal travel cost Abercrombie $1.3 million.
Before giving Jeffries any credit, however, just keep reading. Turns out that in exchange for amending his employment contract and eliminating this perk, Abercrombie will give Jeffries, whose employment contract runs through 2013, a $4 million lump-sum payment. That's right, the CEO of embattled Abercrombie & Fitch, one of the worst-performing brands of the recession, in no small part due to his management decisions, is actually getting paid a sum most people could only dream of just to stop using the company plane as a personal plaything. Who knew corporate self-sacrifice could be so rewarding?
Abercrombie's move has corporate-governance experts shaking their heads. "Most companies have the message that they are eliminating pay perks, not giving the guy cash to eliminate the perk." says Eleanor Bloxham, CEO of the Value Alliance, an advisory firm. "What's been lost in all of this is minimal human common sense." And after so many missteps, you can't help but wonder if Abercrombie will ever get it back. "I just thought, What are they thinking? Really?" says Douglas Park, a Silicon Valley–based consultant. "Customers aren't happy with them right now. Investors aren't happy. You have to wonder what is going through their minds." (See how Americans are spending now.)
Abercrombie isn't doing much explaining. Three members of Abercrombie's compensation committee - Lauren Brisky, the former chief financial officer at Vanderbilt University, Edward Limato, agent for Hollywood hotshots like Mel Gibson and Denzel Washington, and Craig Stapleton, the former U.S. ambassador to the Czech Republic and France under the George W. Bush Administration - did not respond to requests for comment. The company would only release a statement: "Abercrombie & Fitch believes the amendment to the contract is in its best interest."
That's no guarantee. In fact, the deal could cost the company money down the road. The amendment applies to the remaining four years of Jeffries' deal, which expires on Feb. 1, 2014. Yes, the amendment does away with any risk that Jeffries could run the company to ruin with his pleasure travel: if he had planned to fly, say, $10 million worth of joyrides over the next four years, Abercrombie would have saved $5.2 million ($10 million minus the $4 million given to Jeffries today, and the $200,000 per year Abercrombie still has to reimburse the CEO).
But let's use a more reasonable travel estimate. Over the past three years, Jeffries' personal travel on the company plane has cost Abercrombie, on average, $1 million per year. Under the old agreement, $1 million over the remaining four years of the CEO's contract would cost Abercrombie $4 million, the exact amount of the lump-sum payment given to Jeffries. Seems like a wash, but remember that the amended agreement still requires that Abercrombie reimburse Jeffries up to $200,000 per year for his personal trips. So if Jeffries keeps up his recent rate of travel of $1 million per year - which seems pretty heavy to begin with - the company would have lost four years' worth of $200,000 reimbursements, or $800,000, over three times the profit the entire company generated in 2009. If he spends less than $1 million per year in personal plane travel - a reasonable, if not probable, possibility - Abercrombie loses even more money. "The more and more you think about it," says Paul Hodgson, a senior research associate at the Corporate Library, "the more ridiculous it sounds."
So unless Jeffries books a boatload of vacations over the next four years, Abercrombie & Fitch has some serious explaining to do to shareholders. Also, Jeffries needs to explain why he didn't do the right thing and just pass on that lump-sum payment. Of course, Abercrombie's core teen consumer doesn't care less about the company's pay packages. They just want to look good. "Whether or not the CEO receives a $4 million payment doesn't impact sales," says Edward Yruma, retail analyst at KeyBanc Capital Markets. "Stale fashions and high prices impact sales. And Abercrombie is working to fix that." The retailer's turnaround had better come fast. If not, Jeffries' jet should get grounded for good. |
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HenryTo
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| Posted: Sat Nov 14, 2009 1:28 am Post subject: |
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Morningstar's notes on ANF's 3Q earnings:
http://quicktake.morningstar.com/Stocknet/san.aspx?id=316149
| Quote: | Abercrombie & Fitch's ANF third-quarter results support our thesis that this premium-priced retailer will be hurt by budget-constrained teens trading down to cheaper alternatives in the near term. Results were in line with our projections, and we are maintaining our fair value estimate.
While same-store sales at the abercrombie kids, Hollister, and Ruehl concepts declined 22%, 26%, and 30%, respectively, we're encouraged that the firm's namesake A&F brand was down only 16%, a significant improvement from the 26% comp decline over the past two quarters. This suggests to us that some consumers may be willing to trade back up as economic pressures ease. Despite challenges in the domestic markets, international demand for the brand was remarkable during the quarter, and we project that store expansions abroad will remain a key growth driver in the near term. For the rest of the year, we anticipate sequential improvement in same-store sales as the firm laps weak year-over-year comparisons. As expected, the operating margin contracted significantly, to 4.0% from 11.2% in the year-ago quarter. This is largely driven by incremental promotions and as store operating expenses deleverage over a smaller revenue base. For the full year, we estimate that the operating margin will be 4.0%, down from 12.4% in 2008. |
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HenryTo
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| Posted: Fri Aug 14, 2009 8:22 pm Post subject: |
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ANF actually up today, as sales beat expectations. The upper end of the teen retailing industry is still saturated - my sense is that it will take at least another year to work though the saturation and for teen retailing sales to perk back up:
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Abercrombie & Fitch moves to 2nd-qtr loss on charges related to Ruehl closing
By Mae Anderson, AP Retail Writer
On Friday August 14, 2009, 11:03 am EDT
NEW YORK (AP) -- A chastened Abercrombie & Fitch Co. said Friday it is actively lowering prices and trying to catch up with fashion trends such as dresses as the retailer reported a fiscal second-quarter loss and its third straight quarter of double-digit sales declines.
The preppy teen retailer entered the recession determined to wait it out, maintaining its relatively high prices and investing internationally. But consumers have abandoned Abercrombie for lower-priced options such as Aeropostale Inc. and American Eagle Outfitters Inc.
In response, the company has cut jobs and shuttered its even higher-priced Ruehl chain aimed at 20- and 30-somethings.
CEO Mike Jeffries said the company made a misstep with Ruehl.
"The biggest learning from Ruehl is that as a company, we don't do 'mature' well," Jeffries said in a conference call with investors.
Jeffries said the company has introduced lower prices and will lower prices even more in coming quarters.
"We continue to be confronted with very challenging conditions during the second quarter," Jeffries said. "Consumer spending patterns domestically continue to be dictated by cost and value propositions, and this is clearly a headwind for our premium brands."
In the quarter ended ended Aug. 1, Abercrombie's loss totaled $26.7 million, or 30 cents per share. That compares with profit of $77.8 million, or 87 cents per share, a year ago.
Quarterly results included $24.4 million in charges for the Ruehl closing and store asset impairment charges. The company would not provide a per-share loss excluding the closure. However, Thomas Weisel Partners analyst Liz Dunn estimated the loss excluding one-time items would be about 8 cents per share.
Analysts forecast a loss of 7 cents per share. Analyst estimates typically exclude one-time items.
Sales dropped 23 percent to $648.5 million, but that topped analyst expectations of $646.5 million.
New Albany, Ohio-based Abercrombie & Fitch Co., which operates of namesake stores as well as abercrombie, its children's apparel brand; surf-themed Hollister; and intimate apparel store Gilly Hicks, said sales in stores open at least one year, a key retail metric known as same-store sales, dropped 30 percent. Same-store sales fell 27 percent at namesake stores, 29 percent at abercrombie stores, 33 percent at Hollister and 31 percent at Ruehl.
Known for preppy offerings such as jeans and polo shirts, Abercrombie said it is working to improve its fashion offerings, particulary for women. Dresses and belts have been selling well.
"We are always pushing ourselves ... but have admittedly missed some of the fashion opportunities that drove the business in the spring," Jefferies said.
Prices are also in flux. The company said the average prices will be lower in the third quarter and upcoming quarters than the second quarter.
"We are planning to deliver greater reductions in (average unit retail price) for the fall season, but we'll continue to review pricing on an ongoing basis," Jefferies said.
The company slashed marketing, general and administrative costs during the quarter, down 19 percent to $88.7 million from $109 million last year.
The closing of Ruehl, its store focused on handbags and other accessories and aimed at older shoppers, should be complete by the end of the fiscal year.
Jeffries said the company's Gilly Hicks intimate apparel brand, which was skewing older, will now be aimed at the company's 20-year-old target market.
"We are young, we're sexy, we're controversial at times," Jeffries said. "That's what we know how to do, and that's the business that we own here and are comfortable that we can around the world."
Abercrombie had "pretty decent results, better than we expected," said Keybanc Capital Markets analyst Ed Yruma. "They're getting traction on changes in their promotional strategy, including being more focused on denim and on opening price points."
Shares rose 99 cents, or 3 percent, to $33.95 during morning trading.
AP Business Writer Michelle Chapman contributed to this report. |
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HenryTo
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| Posted: Thu Jun 18, 2009 11:03 am Post subject: |
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ANF shutters its 29 Ruehl’s stores:
http://columbus.bizjournals.com/columbus/stories/2009/06/15/daily21.html?ana=yfcpc
| Quote: | | The New Albany-based apparel merchant said Wednesday it will shut Ruehl’s 29 stores and direct-to-consumer operations and will be “substantially complete” with the effort by the end of next January. The decision comes a month after Abercrombie (NYSE:ANF) took a deep strategic look at the chain, which targets young adults with clothes and accessories. |
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