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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Abercrombie and Fitch Co | NYSE:ANF | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
4.27 | 3.42% | 129.17 | 129.175 | 126.29 | 126.65 | 1,177,043 | 01:00:00 |
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
Delaware
|
31-1469076
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
|
|
6301 Fitch Path, New Albany, Ohio
|
43054
|
(Address of principal executive offices)
|
(Zip Code)
|
|
Large accelerated filer
|
x
|
Accelerated filer
|
¨
|
Non-accelerated filer
|
¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
¨
|
Emerging growth company
|
¨
|
|
|
Class A Common Stock
|
|
Outstanding at June 1, 2017
|
$.01 Par Value
|
|
86,016,786 Shares
|
|
|
Page No.
|
|
|
|
Item 1.
|
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
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Item 2.
|
||
|
|
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Item 3.
|
||
|
|
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Item 4.
|
||
|
|
|
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
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|
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Item 2.
|
||
|
|
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Item 6.
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
Thirteen Weeks Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||
Net sales
|
$
|
661,099
|
|
|
$
|
685,483
|
|
Cost of sales, exclusive of depreciation and amortization
|
262,174
|
|
|
259,762
|
|
||
Gross profit
|
398,925
|
|
|
425,721
|
|
||
Stores and distribution expense
|
359,929
|
|
|
369,118
|
|
||
Marketing, general and administrative expense
|
109,893
|
|
|
114,447
|
|
||
Asset impairment
|
730
|
|
|
—
|
|
||
Other operating income, net
|
(1,686
|
)
|
|
(2,933
|
)
|
||
Operating loss
|
(69,941
|
)
|
|
(54,911
|
)
|
||
Interest expense, net
|
4,120
|
|
|
4,506
|
|
||
Loss before taxes
|
(74,061
|
)
|
|
(59,417
|
)
|
||
Income tax benefit
|
(13,052
|
)
|
|
(20,787
|
)
|
||
Net loss
|
(61,009
|
)
|
|
(38,630
|
)
|
||
Less: Net income attributable to noncontrolling interests
|
691
|
|
|
957
|
|
||
Net loss attributable to Abercrombie & Fitch Co.
|
$
|
(61,700
|
)
|
|
$
|
(39,587
|
)
|
|
|
|
|
||||
Net loss per share attributable to Abercrombie & Fitch Co.
|
|
|
|
||||
Basic
|
$
|
(0.91
|
)
|
|
$
|
(0.59
|
)
|
Diluted
|
$
|
(0.91
|
)
|
|
$
|
(0.59
|
)
|
|
|
|
|
||||
Weighted-average shares outstanding
|
|
|
|
||||
Basic
|
68,073
|
|
|
67,625
|
|
||
Diluted
|
68,073
|
|
|
67,625
|
|
||
|
|
|
|
||||
Dividends declared per share
|
$
|
0.20
|
|
|
$
|
0.20
|
|
|
|
|
|
||||
Other comprehensive income
|
|
|
|
||||
Foreign currency translation, net of tax
|
$
|
5,607
|
|
|
$
|
20,425
|
|
Derivative financial instruments, net of tax
|
(4,600
|
)
|
|
(9,955
|
)
|
||
Other comprehensive income
|
1,007
|
|
|
10,470
|
|
||
Comprehensive loss
|
(60,002
|
)
|
|
(28,160
|
)
|
||
Less: Comprehensive income attributable to noncontrolling interests
|
691
|
|
|
957
|
|
||
Comprehensive loss attributable to Abercrombie & Fitch Co.
|
$
|
(60,693
|
)
|
|
$
|
(29,117
|
)
|
|
April 29, 2017
|
|
January 28, 2017
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and equivalents
|
$
|
421,441
|
|
|
$
|
547,189
|
|
Receivables
|
90,346
|
|
|
93,384
|
|
||
Inventories, net
|
398,750
|
|
|
399,795
|
|
||
Other current assets
|
91,565
|
|
|
98,932
|
|
||
Total current assets
|
1,002,102
|
|
|
1,139,300
|
|
||
Property and equipment, net
|
806,057
|
|
|
824,738
|
|
||
Other assets
|
349,806
|
|
|
331,719
|
|
||
Total assets
|
$
|
2,157,965
|
|
|
$
|
2,295,757
|
|
Liabilities and stockholders’ equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
147,531
|
|
|
$
|
187,017
|
|
Accrued expenses
|
248,915
|
|
|
273,044
|
|
||
Short-term portion of deferred lease credits
|
19,522
|
|
|
20,076
|
|
||
Income taxes payable
|
5,264
|
|
|
5,863
|
|
||
Total current liabilities
|
421,232
|
|
|
486,000
|
|
||
Long-term liabilities:
|
|
|
|
||||
Long-term portion of deferred lease credits
|
75,886
|
|
|
76,321
|
|
||
Long-term portion of borrowings, net
|
263,353
|
|
|
262,992
|
|
||
Leasehold financing obligations
|
47,120
|
|
|
46,397
|
|
||
Other liabilities
|
169,588
|
|
|
172,008
|
|
||
Total long-term liabilities
|
555,947
|
|
|
557,718
|
|
||
Stockholders’ equity
|
|
|
|
||||
Class A Common Stock - $0.01 par value: 150,000 shares authorized and 103,300 shares issued at each of April 29, 2017 and January 28, 2017
|
1,033
|
|
|
1,033
|
|
||
Paid-in capital
|
387,394
|
|
|
396,590
|
|
||
Retained earnings
|
2,393,693
|
|
|
2,474,703
|
|
||
Accumulated other comprehensive loss, net of tax
|
(120,295
|
)
|
|
(121,302
|
)
|
||
Treasury stock, at average cost: 35,288 and 35,542 shares at April 29, 2017 and January 28, 2017, respectively
|
(1,489,853
|
)
|
|
(1,507,589
|
)
|
||
Total Abercrombie & Fitch Co. stockholders’ equity
|
1,171,972
|
|
|
1,243,435
|
|
||
Noncontrolling interests
|
8,814
|
|
|
8,604
|
|
||
Total stockholders’ equity
|
1,180,786
|
|
|
1,252,039
|
|
||
Total liabilities and stockholders’ equity
|
$
|
2,157,965
|
|
|
$
|
2,295,757
|
|
|
Thirteen Weeks Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||
Operating activities
|
|
|
|
||||
Net loss
|
$
|
(61,009
|
)
|
|
$
|
(38,630
|
)
|
Adjustments to reconcile net loss to net cash used by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
48,789
|
|
|
50,866
|
|
||
Asset impairment
|
730
|
|
|
—
|
|
||
Loss on disposal
|
2,378
|
|
|
1,287
|
|
||
Amortization of deferred lease credits
|
(5,325
|
)
|
|
(6,506
|
)
|
||
Benefit from deferred income taxes
|
(15,100
|
)
|
|
(21,195
|
)
|
||
Share-based compensation
|
4,880
|
|
|
6,599
|
|
||
Net tax deficit on share-based compensation
|
(9,264
|
)
|
|
(951
|
)
|
||
Changes in assets and liabilities
|
|
|
|
||||
Inventories, net
|
1,316
|
|
|
3,547
|
|
||
Accounts payable and accrued expenses
|
(62,120
|
)
|
|
(63,748
|
)
|
||
Lessor construction allowances
|
2,940
|
|
|
1,881
|
|
||
Income taxes
|
8,630
|
|
|
(3,888
|
)
|
||
Long-term lease deposits
|
(41
|
)
|
|
23,309
|
|
||
Other assets
|
8,367
|
|
|
(10,283
|
)
|
||
Other liabilities
|
(9,433
|
)
|
|
(17,996
|
)
|
||
Net cash used by operating activities
|
(84,262
|
)
|
|
(75,708
|
)
|
||
Investing activities
|
|
|
|
||||
Purchases of property and equipment
|
(32,081
|
)
|
|
(25,983
|
)
|
||
Proceeds from sale of property and equipment
|
203
|
|
|
4,098
|
|
||
Net cash used for investing activities
|
(31,878
|
)
|
|
(21,885
|
)
|
||
Financing activities
|
|
|
|
||||
Dividends paid
|
(13,554
|
)
|
|
(13,471
|
)
|
||
Other financing activities
|
(551
|
)
|
|
(372
|
)
|
||
Net cash used for financing activities
|
(14,105
|
)
|
|
(13,843
|
)
|
||
Effect of exchange rates on cash
|
4,497
|
|
|
13,833
|
|
||
Net decrease in cash and equivalents
|
(125,748
|
)
|
|
(97,603
|
)
|
||
Cash and equivalents, beginning of period
|
547,189
|
|
|
588,578
|
|
||
Cash and equivalents, end of period
|
$
|
421,441
|
|
|
$
|
490,975
|
|
Significant non-cash investing activities
|
|
|
|
||||
Change in accrual for construction in progress
|
$
|
(4,297
|
)
|
|
$
|
(21
|
)
|
Supplemental information
|
|
|
|
||||
Cash paid for interest
|
$
|
3,391
|
|
|
$
|
3,763
|
|
Cash paid for income taxes, net of refunds
|
$
|
3,364
|
|
|
$
|
15,969
|
|
Accounting Standards Update (ASU)
|
|
Description
|
|
Date of
Adoption
|
|
Effect on the Financial Statements or Other Significant Matters
|
Standards adopted
|
||||||
ASU 2015-11,
Simplifying the Measurement of Inventory
|
|
This update amends ASC 330,
Inventory
. The new guidance applies to inventory measured using first-in, first-out (FIFO) or average cost. Under this amendment, inventory is to be measured at the lower of cost and net realizable value, which is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
|
|
January 29, 2017*
|
|
The adoption of this guidance did not have any impact on the Company's consolidated financial statements.
|
ASU 2016-09,
Compensation—Stock Compensation
|
|
This update amends ASC 718,
Compensation
. Under the new guidance, tax benefits and certain tax deficiencies arising from the vesting of share-based payments are to be recognized as income tax benefits or expenses in the statement of operations; whereas, under the previous guidance, such benefits and deficiencies were recorded in additional paid-in-capital. The cash flow effects of the tax benefit are to be reported in cash flows from operating activities; whereas, they were previously reported in cash flows from financing activities. This guidance also allows for entities to make a policy election to estimate forfeitures or account for them when they occur.
|
|
January 29, 2017*
|
|
As required by the update, all excess tax benefits and tax deficiencies recognized on share-based compensation expense are reflected in the condensed consolidated statements of income as a component of the provision for income taxes on a prospective basis. This update resulted in additional non-cash income tax expense of $9.3 million in the first quarter of Fiscal 2017. In addition, excess tax benefits and tax deficiencies recognized on share-based compensation expense are now classified as an operating activity on the condensed consolidated statements of cash flows. The Company has applied this provision on a retrospective basis. For the first quarter of Fiscal 2016, net cash used by operating activities decreased by $0.6 million with a corresponding offset to net cash used for financing activities. The Company has elected to maintain its practice of estimating forfeitures when recognizing expense for share-based payment awards rather than accounting for forfeitures when they occur. Based on share-based compensation awards currently outstanding at current stock prices, the adoption of this guidance will result in non-cash income tax expense of approximately $11 million for Fiscal 2017 and $20 million for Fiscal 2018.
|
Standards not yet adopted
|
||||||
ASU 2014-09,
Revenue from Contracts with Customers
|
|
This update supersedes the revenue recognition requirements in ASC 605,
Revenue Recognition
. The new guidance requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods or services.
|
|
February 4, 2018
|
|
The Company is currently evaluating the impact that this guidance will have on its consolidated financial statements.
|
ASU 2016-02,
Leases
|
|
This update supersedes the leasing requirements in ASC 840,
Leases
. The new guidance requires an entity to recognize lease assets and lease liabilities on the balance sheet and disclose key leasing information that depicts the lease rights and obligations of an entity.
|
|
February 3, 2019*
|
|
The Company expects that this guidance will result in a significant increase in the Company’s long-term assets and long-term liabilities on the Company's consolidated balance sheets, and is currently evaluating additional impacts that it may have on its consolidated financial statements.
|
|
Thirteen Weeks Ended
|
||||
(in thousands)
|
April 29, 2017
|
|
April 30, 2016
|
||
Shares of common stock issued
|
103,300
|
|
|
103,300
|
|
Weighted-average treasury shares
|
(35,227
|
)
|
|
(35,675
|
)
|
Weighted-average — basic shares
|
68,073
|
|
|
67,625
|
|
Dilutive effect of share-based compensation awards
|
—
|
|
|
—
|
|
Weighted-average — diluted shares
|
68,073
|
|
|
67,625
|
|
Anti-dilutive shares
(1)
|
5,263
|
|
|
7,954
|
|
(1)
|
Reflects the total number of shares related to outstanding share-based compensation awards that have been excluded from the computation of net loss per diluted share because the impact would have been anti-dilutive.
|
•
|
Level 1—inputs are unadjusted quoted prices for identical assets or liabilities that are available in active markets that the Company can access at the measurement date.
|
•
|
Level 2—inputs are other than quoted market prices included within Level 1 that are observable for assets or liabilities, directly or indirectly.
|
•
|
Level 3—inputs to the valuation methodology are unobservable.
|
|
Assets and Liabilities at Fair Value as of April 29, 2017
|
||||||||||||||
(in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Trust-owned life insurance policies (at cash surrender value)
|
$
|
—
|
|
|
$
|
100,417
|
|
|
$
|
—
|
|
|
$
|
100,417
|
|
Money market funds
|
21
|
|
|
—
|
|
|
—
|
|
|
21
|
|
||||
Derivative financial instruments
|
—
|
|
|
2,415
|
|
|
—
|
|
|
2,415
|
|
||||
Total assets
|
$
|
21
|
|
|
$
|
102,832
|
|
|
$
|
—
|
|
|
$
|
102,853
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Derivative financial instruments
|
$
|
—
|
|
|
$
|
1,243
|
|
|
$
|
—
|
|
|
$
|
1,243
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
1,243
|
|
|
$
|
—
|
|
|
$
|
1,243
|
|
|
Assets at Fair Value as of January 28, 2017
|
||||||||||||||
(in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Trust-owned life insurance policies (at cash surrender value)
|
$
|
—
|
|
|
$
|
99,654
|
|
|
$
|
—
|
|
|
$
|
99,654
|
|
Money market funds
|
94,026
|
|
|
—
|
|
|
—
|
|
|
94,026
|
|
||||
Derivative financial instruments
|
—
|
|
|
6,042
|
|
|
—
|
|
|
6,042
|
|
||||
Total assets
|
$
|
94,026
|
|
|
$
|
105,696
|
|
|
$
|
—
|
|
|
$
|
199,722
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Derivative financial instruments
|
$
|
—
|
|
|
$
|
492
|
|
|
$
|
—
|
|
|
$
|
492
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
492
|
|
|
$
|
—
|
|
|
$
|
492
|
|
(in thousands)
|
April 29, 2017
|
|
January 28, 2017
|
||||
Gross borrowings outstanding, carrying amount
|
$
|
268,250
|
|
|
$
|
268,250
|
|
Gross borrowings outstanding, fair value
|
$
|
258,861
|
|
|
$
|
260,551
|
|
(in thousands)
|
April 29, 2017
|
|
January 28, 2017
|
||||
Property and equipment, at cost
|
$
|
2,766,557
|
|
|
$
|
2,772,139
|
|
Less: Accumulated depreciation and amortization
|
(1,960,500
|
)
|
|
(1,947,401
|
)
|
||
Property and equipment, net
|
$
|
806,057
|
|
|
$
|
824,738
|
|
|
Number of
Underlying
Shares
|
|
Weighted-Average
Exercise Price
|
|
Aggregate
Intrinsic Value
|
|
Weighted-Average
Remaining
Contractual Life
|
|||||
Outstanding at January 28, 2017
|
189,800
|
|
|
$
|
76.62
|
|
|
|
|
|
||
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
|||
Forfeited or expired
|
(75,000
|
)
|
|
73.42
|
|
|
|
|
|
|||
Outstanding at April 29, 2017
|
114,800
|
|
|
$
|
78.71
|
|
|
$
|
—
|
|
|
0.8
|
Stock options exercisable at April 29, 2017
|
114,800
|
|
|
$
|
78.71
|
|
|
$
|
—
|
|
|
0.8
|
|
Number of
Underlying
Shares
|
|
Weighted-Average
Exercise Price
|
|
Aggregate
Intrinsic Value
|
|
Weighted-Average
Remaining
Contractual Life
|
|||||
Outstanding at January 28, 2017
|
4,079,050
|
|
|
$
|
47.49
|
|
|
|
|
|
||
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
|||
Forfeited or expired
|
(888,197
|
)
|
|
44.34
|
|
|
|
|
|
|||
Outstanding at April 29, 2017
|
3,190,853
|
|
|
$
|
48.50
|
|
|
$
|
—
|
|
|
3.0
|
Stock appreciation rights exercisable at April 29, 2017
|
2,841,662
|
|
|
$
|
51.22
|
|
|
$
|
—
|
|
|
2.5
|
Stock appreciation rights expected to become exercisable in the future as of April 29, 2017
|
267,161
|
|
|
$
|
26.63
|
|
|
$
|
—
|
|
|
7.7
|
|
Service-based Restricted
Stock Units
|
|
Performance-based Restricted
Stock Units
|
|
Market-based Restricted
Stock Units
|
|||||||||||||||
|
Number of
Underlying
Shares
(1)
|
|
Weighted-
Average Grant
Date Fair Value
|
|
Number of
Underlying
Shares
|
|
Weighted-
Average Grant
Date Fair Value
|
|
Number of
Underlying
Shares
|
|
Weighted-
Average Grant
Date Fair Value
|
|||||||||
Unvested at January 28, 2017
|
1,915,461
|
|
|
$
|
25.47
|
|
|
203,923
|
|
|
$
|
22.53
|
|
|
184,892
|
|
|
$
|
26.89
|
|
Granted
|
1,408,972
|
|
|
9.61
|
|
|
524,030
|
|
|
9.11
|
|
|
236,872
|
|
|
11.79
|
|
|||
Adjustments for performance achievement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Vested
|
(466,291
|
)
|
|
28.86
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Forfeited
|
(122,813
|
)
|
|
22.37
|
|
|
(5,163
|
)
|
|
25.15
|
|
|
(5,165
|
)
|
|
29.55
|
|
|||
Unvested at April 29, 2017
|
2,735,329
|
|
|
$
|
16.81
|
|
|
722,790
|
|
|
$
|
12.26
|
|
|
416,599
|
|
|
$
|
17.25
|
|
(1)
|
This includes
786,449
unvested restricted stock units as of April 29, 2017 that are subject to the requirement that the Company must achieve at least $1.00 of GAAP net income attributable to A&F for the fiscal year in order to vest.
|
(in thousands)
|
April 29, 2017
|
|
April 30, 2016
|
||||
Service-based restricted stock units:
|
|
|
|
||||
Total grant date fair value of awards granted
|
$
|
13,540
|
|
|
$
|
21,445
|
|
Total grant date fair value of awards vested
|
13,457
|
|
|
12,892
|
|
||
|
|
|
|
||||
Performance-based restricted stock units:
|
|
|
|
||||
Total grant date fair value of awards granted
|
$
|
4,774
|
|
|
$
|
2,762
|
|
Total grant date fair value of awards vested
|
—
|
|
|
1,151
|
|
||
|
|
|
|
||||
Market-based restricted stock units:
|
|
|
|
||||
Total grant date fair value of awards granted
|
$
|
2,793
|
|
|
$
|
3,601
|
|
Total grant date fair value of awards vested
|
—
|
|
|
—
|
|
|
April 29, 2017
|
|
April 30, 2016
|
||||
Grant date market price
|
$
|
11.43
|
|
|
$
|
31.67
|
|
Fair value
|
$
|
11.79
|
|
|
$
|
38.22
|
|
Assumptions:
|
|
|
|
||||
Price volatility
|
47
|
%
|
|
44
|
%
|
||
Expected term (years)
|
2.9
|
|
|
2.8
|
|
||
Risk-free interest rate
|
1.5
|
%
|
|
1.1
|
%
|
||
Dividend yield
|
7.0
|
%
|
|
2.5
|
%
|
||
Average volatility of peer companies
|
35.2
|
%
|
|
34.4
|
%
|
||
Average correlation coefficient of peer companies
|
0.2664
|
|
|
0.3382
|
|
(1)
|
Amounts reported are the U.S. Dollar notional amounts outstanding as of
April 29, 2017
.
|
(in thousands)
|
Notional Amount
(1)
|
||
Euro
|
$
|
13,895
|
|
British pound
|
$
|
1,283
|
|
(1)
|
Amounts reported are the U.S. Dollar notional amounts outstanding as of
April 29, 2017
.
|
|
|
|
Thirteen Weeks Ended
|
||||||
|
|
|
April 29, 2017
|
|
April 30, 2016
|
||||
(in thousands)
|
Location
|
|
Gain/(Loss)
|
|
Gain/(Loss)
|
||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|||||
Foreign currency exchange forward contracts
|
Other operating income, net
|
|
$
|
28
|
|
|
$
|
(1,777
|
)
|
|
Effective Portion
|
|
Ineffective Portion and Amount Excluded from Effectiveness Testing
|
||||||||||||||||||||||||
|
Amount of Loss Recognized in OCI on Derivative Contracts
(1)
|
|
Location of Gain Reclassified from AOCL into Earnings
|
|
Amount of Gain Reclassified from AOCL into Earnings
(2)
|
|
Location of Gain Recognized in Earnings on Derivative Contracts
|
|
Amount of Gain Recognized in Earnings on Derivative Contracts
(3)
|
||||||||||||||||||
|
Thirteen Weeks Ended
|
||||||||||||||||||||||||||
(in thousands)
|
April 29,
2017 |
|
April 30,
2016 |
|
|
|
April 29,
2017 |
|
April 30,
2016 |
|
|
|
April 29,
2017 |
|
April 30,
2016 |
||||||||||||
Derivatives in cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Foreign currency exchange forward contracts
|
$
|
(1,373
|
)
|
|
$
|
(9,382
|
)
|
|
Cost of sales, exclusive of depreciation and amortization
|
|
$
|
3,535
|
|
|
$
|
2,305
|
|
|
Other operating income, net
|
|
$
|
528
|
|
|
$
|
355
|
|
(1)
|
The amount represents the change in fair value of derivative contracts due to changes in spot rates.
|
(2)
|
The amount represents the reclassification from AOCL into earnings when the hedged item affects earnings, which is when merchandise is sold to the Company’s customers.
|
(3)
|
The amount represents the change in fair value of derivative contracts due to changes in the difference between the spot price and forward price that is excluded from the assessment of hedge effectiveness and, therefore, recognized in earnings.
|
|
Thirteen Weeks Ended April 29, 2017
|
||||||||||
(in thousands)
|
Foreign Currency Translation Adjustment
|
|
Unrealized Gain (Loss) on Derivative Financial Instruments
|
|
Total
|
||||||
Beginning balance at January 28, 2017
|
$
|
(126,127
|
)
|
|
$
|
4,825
|
|
|
$
|
(121,302
|
)
|
Other comprehensive income (loss) before reclassifications
|
5,607
|
|
|
(1,373
|
)
|
|
4,234
|
|
|||
Reclassified from accumulated other comprehensive loss
(1)
|
—
|
|
|
(3,535
|
)
|
|
(3,535
|
)
|
|||
Tax effect
|
—
|
|
|
308
|
|
|
308
|
|
|||
Other comprehensive income (loss)
|
5,607
|
|
|
(4,600
|
)
|
|
1,007
|
|
|||
Ending balance at April 29, 2017
|
$
|
(120,520
|
)
|
|
$
|
225
|
|
|
$
|
(120,295
|
)
|
(1)
|
For the
thirteen
weeks ended
April 29, 2017
, a gain was reclassified from accumulated other comprehensive loss to cost of sales, exclusive of depreciation and amortization on the Condensed Consolidated Statement of Operations and Comprehensive Loss.
|
|
Thirteen Weeks Ended April 30, 2016
|
||||||||||
(in thousands)
|
Foreign Currency Translation Adjustment
|
|
Unrealized Gain (Loss) on Derivative Financial Instruments
|
|
Total
|
||||||
Beginning balance at January 30, 2016
|
$
|
(119,196
|
)
|
|
$
|
4,577
|
|
|
$
|
(114,619
|
)
|
Other comprehensive income (loss) before reclassifications
|
25,660
|
|
|
(9,382
|
)
|
|
16,278
|
|
|||
Reclassified from accumulated other comprehensive loss
(2)
|
—
|
|
|
(2,305
|
)
|
|
(2,305
|
)
|
|||
Tax effect
|
(5,235
|
)
|
|
1,732
|
|
|
(3,503
|
)
|
|||
Other comprehensive income (loss)
|
20,425
|
|
|
(9,955
|
)
|
|
10,470
|
|
|||
Ending balance at April 30, 2016
|
$
|
(98,771
|
)
|
|
$
|
(5,378
|
)
|
|
$
|
(104,149
|
)
|
(2)
|
For the
thirteen
weeks ended
April 30, 2016
, a gain was reclassified from accumulated other comprehensive loss to cost of sales, exclusive of depreciation and amortization on the Condensed Consolidated Statement of Operations and Comprehensive Loss.
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
(in thousands, except change in comparable sales, gross profit rate and per share amounts)
|
|
April 29, 2017
|
|
April 30, 2016
|
||||
Net sales
|
|
$
|
661,099
|
|
|
$
|
685,483
|
|
Change in comparable sales
(1)
|
|
(3
|
)%
|
|
(4
|
)%
|
||
Gross profit rate
|
|
60.3
|
%
|
|
62.1
|
%
|
||
Operating loss
|
|
$
|
(69,941
|
)
|
|
$
|
(54,911
|
)
|
Net loss attributable to A&F
|
|
$
|
(61,700
|
)
|
|
$
|
(39,587
|
)
|
Net loss per diluted share attributable to A&F
|
|
$
|
(0.91
|
)
|
|
$
|
(0.59
|
)
|
(1)
|
Changes in comparable sales are calculated on a constant currency basis by converting prior year store and online sales at current year exchange rates. For inclusion in this calculation, a store must have been open as the same brand at least one year and its square footage must not have been expanded or reduced by more than 20% within the past year.
|
•
|
Comparable sales to remain challenging in the second quarter, with trend improvement in the second half of the year
.
|
•
|
Continued adverse impact from foreign currency on sales and operating income
.
|
•
|
A gross profit rate down slightly to last year's adjusted non-GAAP rate of 61.0%, with continued pressure in the second quarter.
|
•
|
Operating expense to be down at least 3% from last year's adjusted non-GAAP operating expense of $2.025 billion, with approximately 65% of the full year reduction to occur in the second half of the year
.
|
•
|
Net income attributable to noncontrolling interests of approximately $4 million
.
|
•
|
A weighted average diluted share count of approximately 68 million shares, excluding the effect of potential share buybacks
.
|
|
Hollister
(1)
|
|
Abercrombie
(2)
|
|
Total
|
||||||||||||
|
United States
|
|
International
|
|
United States
|
|
International
|
|
United States
|
|
International
|
||||||
January 28, 2017
|
398
|
|
|
145
|
|
|
311
|
|
|
44
|
|
|
709
|
|
|
189
|
|
New
|
1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
3
|
|
|
—
|
|
Closed
|
(2
|
)
|
|
—
|
|
|
(5
|
)
|
|
(1
|
)
|
|
(7
|
)
|
|
(1
|
)
|
April 29, 2017
|
397
|
|
|
145
|
|
|
308
|
|
|
43
|
|
|
705
|
|
|
188
|
|
Gross square feet
(in thousands)
:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
April 29, 2017
|
2,717
|
|
|
1,216
|
|
|
2,396
|
|
|
610
|
|
|
5,113
|
|
|
1,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Hollister
(1)
|
|
Abercrombie
(2)
|
|
Total
|
||||||||||||
|
United States
|
|
International
|
|
United States
|
|
International
|
|
United States
|
|
International
|
||||||
January 30, 2016
|
414
|
|
|
139
|
|
|
340
|
|
|
39
|
|
|
754
|
|
|
178
|
|
New
|
—
|
|
|
2
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
2
|
|
Closed
|
(3
|
)
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
April 30, 2016
|
411
|
|
|
141
|
|
|
334
|
|
|
39
|
|
|
745
|
|
|
180
|
|
Gross square feet
(in thousands)
:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
April 30, 2016
|
2,834
|
|
|
1,195
|
|
|
2,561
|
|
|
619
|
|
|
5,395
|
|
|
1,814
|
|
(1)
|
Excludes five international franchise stores as of
April 29, 2017
, three international franchise stores as of
January 28, 2017
and two international franchise stores as of
April 30, 2016
and January 30, 2016.
|
(2)
|
Includes Abercrombie & Fitch and abercrombie kids brands. Excludes three international franchise stores as of
April 29, 2017
and one international franchise store as of
January 28, 2017
,
April 30, 2016
and January 30, 2016.
|
|
Thirteen Weeks Ended
|
|
|
|
|
||||||||||||
|
April 29, 2017
|
|
April 30, 2016
|
|
|
|
|
||||||||||
(in thousands)
|
Net Sales
|
|
Change in
Comparable
Sales
(1)
|
|
Net Sales
|
|
Change in
Comparable
Sales
(1)
|
|
Net Sales
$ Change
|
|
Net Sales
% Change
|
||||||
Hollister
|
$
|
374,677
|
|
|
3%
|
|
$
|
362,147
|
|
|
—%
|
|
$
|
12,530
|
|
|
3%
|
Abercrombie
(2)
|
286,422
|
|
|
(10)%
|
|
323,336
|
|
|
(8)%
|
|
(36,914
|
)
|
|
(11)%
|
|||
Total net sales
|
$
|
661,099
|
|
|
(3)%
|
|
$
|
685,483
|
|
|
(4)%
|
|
$
|
(24,384
|
)
|
|
(4)%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
409,068
|
|
|
(3)%
|
|
$
|
425,429
|
|
|
(2)%
|
|
$
|
(16,361
|
)
|
|
(4)%
|
International
|
252,031
|
|
|
(2)%
|
|
260,054
|
|
|
(7)%
|
|
(8,023
|
)
|
|
(3)%
|
|||
Total net sales
|
$
|
661,099
|
|
|
(3)%
|
|
$
|
685,483
|
|
|
(4)%
|
|
$
|
(24,384
|
)
|
|
(4)%
|
(1)
|
Changes in comparable sales are calculated on a constant currency basis by converting prior year store and online sales at current year exchange rates. For inclusion in this calculation, a store must have been open as the same brand at least one year and its square footage must not have been expanded or reduced by more than 20% within the past year.
|
(2)
|
Includes Abercrombie & Fitch and abercrombie kids brands.
|
|
Thirteen Weeks Ended
|
||||||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Cost of sales, exclusive of depreciation and amortization
|
$
|
262,174
|
|
|
39.7%
|
|
$
|
259,762
|
|
|
37.9%
|
|
|
|
|
|
|
|
|
||||
Gross profit
|
$
|
398,925
|
|
|
60.3%
|
|
$
|
425,721
|
|
|
62.1%
|
|
Thirteen Weeks Ended
|
||||||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Stores and distribution expense
|
$
|
359,929
|
|
|
54.4%
|
|
$
|
369,118
|
|
|
53.8%
|
|
Thirteen Weeks Ended
|
||||||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Marketing, general and administrative expense
|
$
|
109,893
|
|
|
16.6%
|
|
$
|
114,447
|
|
|
16.7%
|
|
Thirteen Weeks Ended
|
||||||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Other operating income, net
|
$
|
1,686
|
|
|
0.3%
|
|
$
|
2,933
|
|
|
0.4%
|
|
Thirteen Weeks Ended
|
||||||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Operating loss
|
$
|
(69,941
|
)
|
|
(10.6)%
|
|
$
|
(54,911
|
)
|
|
(8.0)%
|
|
Thirteen Weeks Ended
|
||||||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Interest expense
|
$
|
5,333
|
|
|
0.8%
|
|
$
|
5,613
|
|
|
0.8%
|
Interest income
|
(1,213
|
)
|
|
(0.2)%
|
|
(1,107
|
)
|
|
(0.2)%
|
||
Interest expense, net
|
$
|
4,120
|
|
|
0.6%
|
|
$
|
4,506
|
|
|
0.7%
|
|
Thirteen Weeks Ended
|
||||||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||||||
(in thousands, except ratios)
|
|
|
Effective Tax Rate
|
|
|
|
Effective Tax Rate
|
||||
Income tax benefit
|
$
|
(13,052
|
)
|
|
17.6%
|
|
$
|
(20,787
|
)
|
|
35.0%
|
(in thousands)
|
April 29, 2017
|
|
April 30, 2016
|
||||
Borrowings, gross at carrying amount
|
$
|
268,250
|
|
|
$
|
293,250
|
|
Unamortized discount
|
(1,666
|
)
|
|
(2,250
|
)
|
||
Unamortized fees
|
(3,231
|
)
|
|
(4,385
|
)
|
||
Borrowings, net
|
263,353
|
|
|
286,615
|
|
||
Less: short-term portion of borrowings, net
|
—
|
|
|
(733
|
)
|
||
Long-term portion of borrowings, net
|
$
|
263,353
|
|
|
$
|
285,882
|
|
•
|
changes in global economic and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits, could have a material adverse effect on our business, results of operations and liquidity;
|
•
|
our inability to anticipate customer demand and changing fashion trends and to manage our inventory commensurately could adversely impact our sales levels and profitability;
|
•
|
our market share may be negatively impacted by increasing competition and pricing pressures from companies with brands or merchandise competitive with ours;
|
•
|
direct-to-consumer sales channels are a significant component of our growth strategy, and the failure to successfully develop our position in these channels could have an adverse impact on our results of operations;
|
•
|
our ability to conduct business in international markets may be adversely affected by legal, regulatory, political and economic risks;
|
•
|
our inability to successfully implement our strategic plans could have a negative impact on our growth and profitability;
|
•
|
our failure to protect our reputation could have a material adverse effect on our brands;
|
•
|
our business could suffer if our information technology systems are disrupted or cease to operate effectively;
|
•
|
we may be exposed to risks and costs associated with cyber-attacks, credit card fraud and identity theft that would cause us to incur unexpected expenses and reputation loss;
|
•
|
fluctuations in foreign currency exchange rates could adversely impact our financial condition and results of operations;
|
•
|
changes in the cost, availability and quality of raw materials, labor, transportation and trade relations could cause manufacturing delays and increase our costs;
|
•
|
we depend upon independent third parties for the manufacture and delivery of all our merchandise, and a disruption of the manufacture or delivery of our merchandise could result in lost sales and could increase our costs;
|
•
|
our ability to attract customers to our stores depends, in part, on the success of the shopping malls or area attractions that our stores are located in or around;
|
•
|
we rely on the experience and skills of our senior executive officers, the loss of whom could have a material adverse effect on our business;
|
•
|
our reliance on DCs makes us susceptible to disruptions or adverse conditions affecting our supply chain;
|
•
|
our litigation exposure could have a material adverse effect on our financial condition and results of operations;
|
•
|
our inability or failure to adequately protect our trademarks could have a negative impact on our brand image and limit our ability to penetrate new markets;
|
•
|
fluctuations in our tax obligations and effective tax rate may result in volatility in our operating results;
|
•
|
extreme weather conditions and the seasonal nature of our business may cause net sales to fluctuate and negatively impact our results of operations;
|
•
|
our facilities, systems and stores, as well as the facilities and systems of our vendors and manufacturers, are vulnerable to natural disasters, pandemic disease and other unexpected events, any of which could result in an interruption to our business and adversely affect our operating results;
|
•
|
the impact of war or acts of terrorism could have a material adverse effect on our operating results and financial condition;
|
•
|
changes in the regulatory or compliance landscape could adversely affect our business and results of operations;
|
•
|
our Asset-Based Revolving Credit Agreement and our Term Loan Agreement include restrictive covenants that limit our flexibility in operating our business; and,
|
•
|
compliance with changing regulations and standards for accounting, corporate governance and public disclosure could adversely affect our business, results of operations and reported financial results.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period (Fiscal Month)
|
Total Number of Shares Purchased
(1)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(2)
|
|
Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs
(3)
|
|||||
January 29, 2017 through February 25, 2017
|
1,032
|
|
|
$
|
12.07
|
|
|
—
|
|
|
6,503,656
|
|
February 26, 2017 through April 1, 2017
|
150,735
|
|
|
$
|
11.79
|
|
|
—
|
|
|
6,503,656
|
|
April 2, 2017 through April 29, 2017
|
2,264
|
|
|
$
|
11.40
|
|
|
—
|
|
|
6,503,656
|
|
Total
|
154,031
|
|
|
$
|
11.79
|
|
|
—
|
|
|
6,503,656
|
|
(1)
|
All of the
154,031
shares of A&F’s Common Stock purchased during the
thirteen
weeks ended
April 29, 2017
represented shares which were withheld for tax payments due upon the exercise of employee stock appreciation rights and vesting of employee restricted stock units.
|
(2)
|
No shares were repurchased during the
thirteen
weeks ended
April 29, 2017
pursuant to A&F’s publicly announced stock repurchase authorization. On August 14, 2012, A&F’s Board of Directors authorized the repurchase of 10.0 million shares of A&F’s Common Stock, which was announced on August 15, 2012.
|
(3)
|
The number shown represents, as of the end of each period, the maximum number of shares of A&F’s Common Stock that may yet be purchased under A&F’s publicly announced stock repurchase authorization described in footnote 2 above. The shares may be purchased, from time-to-time, depending on market conditions.
|
|
*
|
Filed herewith.
|
**
|
Furnished herewith.
|
|
ABERCROMBIE & FITCH CO.
|
|
Date: June 5, 2017
|
By
|
/s/ Joanne C. Crevoiserat
|
|
|
Joanne C. Crevoiserat
|
|
|
Executive Vice President, Chief Operating Officer and Chief Financial Officer
(Principal Financial Officer and Authorized Officer)
|
|
*
|
Filed herewith.
|
**
|
Furnished herewith.
|
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