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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 | |
---|---|---|---|---|---|---|---|---|
2.85 | 2.28% | 127.745 | 128.86 | 126.29 | 126.65 | 535,113 | 18:49:09 |
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
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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)
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(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 November 30, 2017
|
$.01 Par Value
|
|
68,101,770 Shares
|
|
|
Page No.
|
|
|
|
Item 1.
|
|
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|
|
|
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||
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|
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|
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Item 2.
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||
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Item 3.
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||
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Item 4.
|
||
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|
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Item 1.
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||
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Item 1A.
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||
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Item 2.
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||
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Item 6.
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ITEM 1.
|
FINANCIAL STATEMENTS (UNAUDITED)
|
|
Thirteen Weeks Ended
|
|
Thirty-nine Weeks Ended
|
||||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
Net sales
|
$
|
859,112
|
|
|
$
|
821,734
|
|
|
$
|
2,299,532
|
|
|
$
|
2,290,377
|
|
Cost of sales, exclusive of depreciation and amortization
|
332,485
|
|
|
310,995
|
|
|
913,085
|
|
|
876,810
|
|
||||
Gross profit
|
526,627
|
|
|
510,739
|
|
|
1,386,447
|
|
|
1,413,567
|
|
||||
Stores and distribution expense
|
375,944
|
|
|
386,609
|
|
|
1,105,168
|
|
|
1,138,644
|
|
||||
Marketing, general and administrative expense
|
124,533
|
|
|
105,307
|
|
|
343,779
|
|
|
331,473
|
|
||||
Asset impairment
|
3,480
|
|
|
—
|
|
|
10,345
|
|
|
6,356
|
|
||||
Other operating income, net
|
(70
|
)
|
|
(822
|
)
|
|
(4,555
|
)
|
|
(16,835
|
)
|
||||
Operating income (loss)
|
22,740
|
|
|
19,645
|
|
|
(68,290
|
)
|
|
(46,071
|
)
|
||||
Interest expense, net
|
4,571
|
|
|
4,609
|
|
|
12,780
|
|
|
13,856
|
|
||||
Income (loss) before taxes
|
18,169
|
|
|
15,036
|
|
|
(81,070
|
)
|
|
(59,927
|
)
|
||||
Income tax expense (benefit)
|
7,553
|
|
|
6,762
|
|
|
(16,062
|
)
|
|
(17,540
|
)
|
||||
Net income (loss)
|
10,616
|
|
|
8,274
|
|
|
(65,008
|
)
|
|
(42,387
|
)
|
||||
Less: Net income attributable to noncontrolling interests
|
541
|
|
|
393
|
|
|
2,108
|
|
|
2,448
|
|
||||
Net income (loss) attributable to A&F
|
$
|
10,075
|
|
|
$
|
7,881
|
|
|
$
|
(67,116
|
)
|
|
$
|
(44,835
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per share attributable to A&F
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.15
|
|
|
$
|
0.12
|
|
|
$
|
(0.98
|
)
|
|
$
|
(0.66
|
)
|
Diluted
|
$
|
0.15
|
|
|
$
|
0.12
|
|
|
$
|
(0.98
|
)
|
|
$
|
(0.66
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares outstanding
|
|
|
|
|
|
|
|
||||||||
Basic
|
68,512
|
|
|
67,975
|
|
|
68,347
|
|
|
67,848
|
|
||||
Diluted
|
69,425
|
|
|
68,277
|
|
|
68,347
|
|
|
67,848
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Dividends declared per share
|
$
|
0.20
|
|
|
$
|
0.20
|
|
|
$
|
0.60
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation, net of tax
|
$
|
(3,496
|
)
|
|
$
|
(12,194
|
)
|
|
$
|
21,183
|
|
|
$
|
870
|
|
Derivative financial instruments, net of tax
|
5,518
|
|
|
3,937
|
|
|
(9,230
|
)
|
|
557
|
|
||||
Other comprehensive income (loss)
|
2,022
|
|
|
(8,257
|
)
|
|
11,953
|
|
|
1,427
|
|
||||
Comprehensive income (loss)
|
12,638
|
|
|
17
|
|
|
(53,055
|
)
|
|
(40,960
|
)
|
||||
Less: Comprehensive income attributable to noncontrolling interests
|
541
|
|
|
393
|
|
|
2,108
|
|
|
2,448
|
|
||||
Comprehensive income (loss) attributable to A&F
|
$
|
12,097
|
|
|
$
|
(376
|
)
|
|
$
|
(55,163
|
)
|
|
$
|
(43,408
|
)
|
|
October 28, 2017
|
|
January 28, 2017
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and equivalents
|
$
|
459,293
|
|
|
$
|
547,189
|
|
Receivables
|
78,554
|
|
|
93,384
|
|
||
Inventories, net
|
570,484
|
|
|
399,795
|
|
||
Other current assets
|
68,903
|
|
|
98,932
|
|
||
Total current assets
|
1,177,234
|
|
|
1,139,300
|
|
||
Property and equipment, net
|
767,930
|
|
|
824,738
|
|
||
Other assets
|
352,737
|
|
|
331,719
|
|
||
Total assets
|
$
|
2,297,901
|
|
|
$
|
2,295,757
|
|
Liabilities and stockholders’ equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
248,963
|
|
|
$
|
187,017
|
|
Accrued expenses
|
292,479
|
|
|
273,044
|
|
||
Short-term portion of deferred lease credits
|
19,314
|
|
|
20,076
|
|
||
Income taxes payable
|
6,189
|
|
|
5,863
|
|
||
Total current liabilities
|
566,945
|
|
|
486,000
|
|
||
Long-term liabilities:
|
|
|
|
||||
Long-term portion of deferred lease credits
|
74,782
|
|
|
76,321
|
|
||
Long-term portion of borrowings, net
|
263,910
|
|
|
262,992
|
|
||
Leasehold financing obligations
|
48,082
|
|
|
46,397
|
|
||
Other liabilities
|
174,023
|
|
|
172,008
|
|
||
Total long-term liabilities
|
560,797
|
|
|
557,718
|
|
||
Stockholders’ equity
|
|
|
|
||||
Class A Common Stock - $0.01 par value: 150,000 shares authorized and 103,300 shares issued at each of October 28, 2017 and January 28, 2017
|
1,033
|
|
|
1,033
|
|
||
Paid-in capital
|
389,384
|
|
|
396,590
|
|
||
Retained earnings
|
2,361,055
|
|
|
2,474,703
|
|
||
Accumulated other comprehensive loss, net of tax
|
(109,349
|
)
|
|
(121,302
|
)
|
||
Treasury stock, at average cost: 35,184 and 35,542 shares at October 28, 2017 and January 28, 2017, respectively
|
(1,481,363
|
)
|
|
(1,507,589
|
)
|
||
Total Abercrombie & Fitch Co. stockholders’ equity
|
1,160,760
|
|
|
1,243,435
|
|
||
Noncontrolling interests
|
9,399
|
|
|
8,604
|
|
||
Total stockholders’ equity
|
1,170,159
|
|
|
1,252,039
|
|
||
Total liabilities and stockholders’ equity
|
$
|
2,297,901
|
|
|
$
|
2,295,757
|
|
|
Thirty-nine Weeks Ended
|
||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||
Operating activities
|
|
|
|
||||
Net loss
|
$
|
(65,008
|
)
|
|
$
|
(42,387
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
146,147
|
|
|
146,666
|
|
||
Asset impairment
|
10,345
|
|
|
6,356
|
|
||
Loss on disposal
|
5,624
|
|
|
1,914
|
|
||
Amortization of deferred lease credits
|
(16,510
|
)
|
|
(18,601
|
)
|
||
Benefit from deferred income taxes
|
(15,597
|
)
|
|
(26,103
|
)
|
||
Share-based compensation
|
15,774
|
|
|
16,691
|
|
||
Changes in assets and liabilities
|
|
|
|
||||
Inventories, net
|
(167,546
|
)
|
|
(91,375
|
)
|
||
Accounts payable and accrued expenses
|
73,214
|
|
|
9,533
|
|
||
Lessor construction allowances
|
12,954
|
|
|
4,976
|
|
||
Income taxes
|
93
|
|
|
(6,463
|
)
|
||
Long-term lease deposits
|
(421
|
)
|
|
23,653
|
|
||
Other assets
|
40,706
|
|
|
(4,544
|
)
|
||
Other liabilities
|
(10,036
|
)
|
|
1,776
|
|
||
Net cash provided by operating activities
|
29,739
|
|
|
22,092
|
|
||
Investing activities
|
|
|
|
||||
Purchases of property and equipment
|
(86,300
|
)
|
|
(96,814
|
)
|
||
Proceeds from sale of property and equipment
|
203
|
|
|
4,098
|
|
||
Net cash used for investing activities
|
(86,097
|
)
|
|
(92,716
|
)
|
||
Financing activities
|
|
|
|
||||
Dividends paid
|
(40,776
|
)
|
|
(40,526
|
)
|
||
Other financing activities
|
(2,423
|
)
|
|
(4,840
|
)
|
||
Net cash used for financing activities
|
(43,199
|
)
|
|
(45,366
|
)
|
||
Effect of exchange rates on cash
|
11,661
|
|
|
(2,868
|
)
|
||
Net decrease in cash and equivalents
|
(87,896
|
)
|
|
(118,858
|
)
|
||
Cash and equivalents, beginning of period
|
547,189
|
|
|
588,578
|
|
||
Cash and equivalents, end of period
|
$
|
459,293
|
|
|
$
|
469,720
|
|
Significant non-cash investing activities
|
|
|
|
||||
Change in accrual for construction in progress
|
$
|
(10,445
|
)
|
|
$
|
(12,453
|
)
|
Supplemental information
|
|
|
|
||||
Cash paid for interest
|
$
|
9,849
|
|
|
$
|
11,538
|
|
Cash paid for income taxes, net of refunds
|
$
|
(14,921
|
)
|
|
$
|
20,516
|
|
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 operations as a component of the provision for income taxes on a prospective basis. This update resulted in additional non-cash income tax expense of $0.2 million and $10.1 million for the thirteen and thirty-nine weeks ended October 28, 2017, respectively. 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 thirty-nine weeks ended October 29, 2016, net cash provided by operating activities increased by $0.7 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 and the price of the Company's Common Stock as of October 28, 2017, the adoption of this guidance would result in non-cash income tax expense of approximately $11 million for Fiscal 2017, $19 million for Fiscal 2018 and $3 million for Fiscal 2019.
|
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. Based on its preliminary assessment, the Company has determined this guidance will impact the classification and timing of the recognition of gift card breakage. The Company does not expect this guidance to have a material impact on store, direct-to-consumer, wholesale, franchise, or license revenues.
|
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 material 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 this guidance may have on its consolidated financial statements. The Company will not be early adopting this guidance.
|
ASU 2017-12,
Derivatives and Hedging
|
|
This update amends ASC 815,
Derivatives and Hedging
. The new guidance simplifies certain aspects of hedge accounting for both financial and commodity risks to more accurately present the economic effects of an entity’s risk management activities in its financial statements. Under the new standard, more hedging strategies will be eligible for hedge accounting, including hedges of the benchmark rate component of the contractual coupon cash flows of fixed-rate assets or liabilities and partial-term hedges of fixed-rate assets or liabilities. For cash flow and net investment hedges, the guidance requires a modified retrospective approach while the amended presentation and disclosure guidance requires a prospective approach.
|
|
February 3, 2019*
|
|
The Company is currently evaluating the impact that this guidance will have on its consolidated financial statements. The Company will not be early adopting this guidance.
|
|
Thirteen Weeks Ended
|
|
Thirty-nine Weeks Ended
|
||||||||
(in thousands)
|
October 28, 2017
|
|
October 29, 2016
|
|
October 28, 2017
|
|
October 29, 2016
|
||||
Shares of common stock issued
|
103,300
|
|
|
103,300
|
|
|
103,300
|
|
|
103,300
|
|
Weighted-average treasury shares
|
(34,788
|
)
|
|
(35,325
|
)
|
|
(34,953
|
)
|
|
(35,452
|
)
|
Weighted-average — basic shares
|
68,512
|
|
|
67,975
|
|
|
68,347
|
|
|
67,848
|
|
Dilutive effect of share-based compensation awards
|
913
|
|
|
302
|
|
|
—
|
|
|
—
|
|
Weighted-average — diluted shares
|
69,425
|
|
|
68,277
|
|
|
68,347
|
|
|
67,848
|
|
Anti-dilutive shares
(1)
|
5,181
|
|
|
6,126
|
|
|
5,367
|
|
|
6,209
|
|
(1)
|
Reflects the total number of shares related to outstanding share-based compensation awards that have been excluded from the computation of net income (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 October 28, 2017
|
||||||||||||||
(in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Trust-owned life insurance policies (at cash surrender value)
|
$
|
—
|
|
|
$
|
101,962
|
|
|
$
|
—
|
|
|
$
|
101,962
|
|
Money market funds
|
25,071
|
|
|
—
|
|
|
—
|
|
|
25,071
|
|
||||
Derivative financial instruments
|
—
|
|
|
1,256
|
|
|
—
|
|
|
1,256
|
|
||||
Total assets
|
$
|
25,071
|
|
|
$
|
103,218
|
|
|
$
|
—
|
|
|
$
|
128,289
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Derivative financial instruments
|
$
|
—
|
|
|
$
|
3,553
|
|
|
$
|
—
|
|
|
$
|
3,553
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
3,553
|
|
|
$
|
—
|
|
|
$
|
3,553
|
|
|
Assets and Liabilities 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)
|
October 28, 2017
|
|
January 28, 2017
|
||||
Gross borrowings outstanding, carrying amount
|
$
|
268,250
|
|
|
$
|
268,250
|
|
Gross borrowings outstanding, fair value
|
$
|
266,909
|
|
|
$
|
260,551
|
|
(in thousands)
|
October 28, 2017
|
|
January 28, 2017
|
||||
Property and equipment, at cost
|
$
|
2,810,471
|
|
|
$
|
2,772,139
|
|
Less: Accumulated depreciation and amortization
|
(2,042,541
|
)
|
|
(1,947,401
|
)
|
||
Property and equipment, net
|
$
|
767,930
|
|
|
$
|
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
|
(88,600
|
)
|
|
74.74
|
|
|
|
|
|
|||
Outstanding at October 28, 2017
|
101,200
|
|
|
$
|
78.26
|
|
|
$
|
—
|
|
|
0.3
|
Stock options exercisable at October 28, 2017
|
101,200
|
|
|
$
|
78.26
|
|
|
$
|
—
|
|
|
0.3
|
|
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
|
(982,928
|
)
|
|
42.85
|
|
|
|
|
|
|||
Outstanding at October 28, 2017
|
3,096,122
|
|
|
$
|
49.09
|
|
|
$
|
—
|
|
|
2.2
|
Stock appreciation rights exercisable at October 28, 2017
|
2,846,623
|
|
|
$
|
51.14
|
|
|
$
|
—
|
|
|
1.7
|
Stock appreciation rights expected to become exercisable in the future as of October 28, 2017
|
225,010
|
|
|
$
|
25.87
|
|
|
$
|
—
|
|
|
7.2
|
|
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
|
1,673,528
|
|
|
9.89
|
|
|
524,030
|
|
|
9.11
|
|
|
236,872
|
|
|
11.79
|
|
|||
Adjustments for performance achievement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Vested
|
(676,345
|
)
|
|
25.92
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Forfeited
|
(293,668
|
)
|
|
23.00
|
|
|
(37,779
|
)
|
|
21.75
|
|
|
(37,784
|
)
|
|
26.14
|
|
|||
Unvested at October 28, 2017
|
2,618,976
|
|
|
$
|
15.61
|
|
|
690,174
|
|
|
$
|
11.82
|
|
|
383,980
|
|
|
$
|
16.50
|
|
(1)
|
Includes
730,736
unvested restricted stock units as of
October 28, 2017
which are subject to the vesting requirement that the Company must achieve at least $1.00 of GAAP net income attributable to A&F for the fiscal year immediately preceding the vesting date. Holders of these restricted stock units have the opportunity to earn back one or more installments of the award if the cumulative performance requirements are met in a subsequent year.
|
(in thousands)
|
October 28, 2017
|
|
October 29, 2016
|
||||
Service-based restricted stock units:
|
|
|
|
||||
Total grant date fair value of awards granted
|
$
|
16,551
|
|
|
$
|
28,310
|
|
Total grant date fair value of awards vested
|
17,531
|
|
|
18,337
|
|
||
|
|
|
|
||||
Performance-based restricted stock units:
|
|
|
|
||||
Total grant date fair value of awards granted
|
$
|
4,774
|
|
|
$
|
3,334
|
|
Total grant date fair value of awards vested
|
—
|
|
|
1,178
|
|
||
|
|
|
|
||||
Market-based restricted stock units:
|
|
|
|
||||
Total grant date fair value of awards granted
|
$
|
2,793
|
|
|
$
|
4,023
|
|
Total grant date fair value of awards vested
|
—
|
|
|
—
|
|
|
October 28, 2017
|
|
October 29, 2016
|
||||
Grant date market price
|
$
|
11.43
|
|
|
$
|
28.06
|
|
Fair value
|
$
|
11.79
|
|
|
$
|
31.01
|
|
Assumptions:
|
|
|
|
||||
Price volatility
|
47
|
%
|
|
45
|
%
|
||
Expected term (years)
|
2.9
|
|
|
2.7
|
|
||
Risk-free interest rate
|
1.5
|
%
|
|
1.0
|
%
|
||
Dividend yield
|
7.0
|
%
|
|
3.0
|
%
|
||
Average volatility of peer companies
|
35.2
|
%
|
|
34.5
|
%
|
||
Average correlation coefficient of peer companies
|
0.2664
|
|
|
0.3415
|
|
(1)
|
Amounts reported are the U.S. Dollar notional amounts outstanding as of
October 28, 2017
.
|
(in thousands)
|
Notional Amount
(1)
|
||
Euro
|
$
|
23,424
|
|
British pound
|
$
|
1,313
|
|
(1)
|
Amounts reported are the U.S. Dollar notional amounts outstanding as of
October 28, 2017
.
|
|
|
|
Thirteen Weeks Ended
|
|
Thirty-nine Weeks Ended
|
||||||||||||
|
|
|
October 28, 2017
|
|
October 29, 2016
|
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands)
|
Location
|
|
Gain/(Loss)
|
|
Gain/(Loss)
|
|
Gain/(Loss)
|
|
Gain/(Loss)
|
||||||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|||||||||
Foreign currency exchange forward contracts
|
Other operating income, net
|
|
$
|
634
|
|
|
$
|
152
|
|
|
$
|
83
|
|
|
$
|
295
|
|
|
Effective Portion
|
|
Ineffective Portion and Amount Excluded from Effectiveness Testing
|
||||||||||||||||||||||||
|
Amount of Gain (Loss) Recognized in AOCL on Derivative Contracts
(1)
|
|
Location of Gain (Loss) Reclassified from AOCL into Earnings
|
|
Amount of Gain (Loss) 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)
|
October 28, 2017
|
|
October 29, 2016
|
|
|
|
October 28, 2017
|
|
October 29, 2016
|
|
|
|
October 28, 2017
|
|
October 29, 2016
|
||||||||||||
Derivatives in cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Foreign currency exchange forward contracts
|
$
|
1,775
|
|
|
$
|
4,986
|
|
|
Cost of sales, exclusive of depreciation and amortization
|
|
$
|
(3,544
|
)
|
|
$
|
450
|
|
|
Other operating income, net
|
|
$
|
975
|
|
|
$
|
695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Thirty-nine Weeks Ended
|
||||||||||||||||||||||||||
(in thousands)
|
October 28, 2017
|
|
October 29, 2016
|
|
|
|
October 28, 2017
|
|
October 29, 2016
|
|
|
|
October 28, 2017
|
|
October 29, 2016
|
||||||||||||
Derivatives in cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Foreign currency exchange forward contracts
|
$
|
(10,627
|
)
|
|
$
|
3,026
|
|
|
Cost of sales, exclusive of depreciation and amortization
|
|
$
|
536
|
|
|
$
|
2,551
|
|
|
Other operating income, net
|
|
$
|
2,136
|
|
|
$
|
1,308
|
|
(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 October 28, 2017
|
||||||||||
(in thousands)
|
Foreign Currency Translation Adjustment
|
|
Unrealized Gain (Loss) on Derivative Financial Instruments
|
|
Total
|
||||||
Beginning balance at July 29, 2017
|
$
|
(101,448
|
)
|
|
$
|
(9,923
|
)
|
|
$
|
(111,371
|
)
|
Other comprehensive (loss) income before reclassifications
|
(2,451
|
)
|
|
1,775
|
|
|
(676
|
)
|
|||
Reclassified from accumulated other comprehensive loss
(1)
|
—
|
|
|
3,544
|
|
|
3,544
|
|
|||
Tax effect
|
(1,045
|
)
|
|
199
|
|
|
(846
|
)
|
|||
Other comprehensive (loss) income
|
(3,496
|
)
|
|
5,518
|
|
|
2,022
|
|
|||
Ending balance at October 28, 2017
|
$
|
(104,944
|
)
|
|
$
|
(4,405
|
)
|
|
$
|
(109,349
|
)
|
|
Thirty-nine Weeks Ended October 28, 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
|
22,228
|
|
|
(10,627
|
)
|
|
11,601
|
|
|||
Reclassified from accumulated other comprehensive loss
(1)
|
—
|
|
|
(536
|
)
|
|
(536
|
)
|
|||
Tax effect
|
(1,045
|
)
|
|
1,933
|
|
|
888
|
|
|||
Other comprehensive income (loss)
|
21,183
|
|
|
(9,230
|
)
|
|
11,953
|
|
|||
Ending balance at October 28, 2017
|
$
|
(104,944
|
)
|
|
$
|
(4,405
|
)
|
|
$
|
(109,349
|
)
|
(1)
|
Amount represents gains reclassified from accumulated other comprehensive loss to cost of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).
|
|
Thirteen Weeks Ended October 29, 2016
|
||||||||||
(in thousands)
|
Foreign Currency Translation Adjustment
|
|
Unrealized Gain (Loss) on Derivative Financial Instruments
|
|
Total
|
||||||
Beginning balance at July 30, 2016
|
$
|
(106,132
|
)
|
|
$
|
1,197
|
|
|
$
|
(104,935
|
)
|
Other comprehensive (loss) income before reclassifications
|
(12,194
|
)
|
|
4,986
|
|
|
(7,208
|
)
|
|||
Reclassified from accumulated other comprehensive loss
(2)
|
—
|
|
|
(450
|
)
|
|
(450
|
)
|
|||
Tax effect
|
—
|
|
|
(599
|
)
|
|
(599
|
)
|
|||
Other comprehensive (loss) income
|
(12,194
|
)
|
|
3,937
|
|
|
(8,257
|
)
|
|||
Ending balance at October 29, 2016
|
$
|
(118,326
|
)
|
|
$
|
5,134
|
|
|
$
|
(113,192
|
)
|
|
Thirty-nine Weeks Ended October 29, 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 before reclassifications
|
870
|
|
|
3,026
|
|
|
3,896
|
|
|||
Reclassified from accumulated other comprehensive loss
(2)
|
—
|
|
|
(2,551
|
)
|
|
(2,551
|
)
|
|||
Tax effect
|
—
|
|
|
82
|
|
|
82
|
|
|||
Other comprehensive income
|
870
|
|
|
557
|
|
|
1,427
|
|
|||
Ending balance at October 29, 2016
|
$
|
(118,326
|
)
|
|
$
|
5,134
|
|
|
$
|
(113,192
|
)
|
(2)
|
Amount represents gains reclassified from accumulated other comprehensive loss to cost of sales, exclusive of depreciation and amortization, on the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).
|
|
Thirteen Weeks Ended
|
|
Thirty-nine Weeks Ended
|
||||||||||||
(in thousands)
|
October 28, 2017
|
|
October 29, 2016
|
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
Hollister
|
$
|
508,086
|
|
|
$
|
463,479
|
|
|
$
|
1,329,401
|
|
|
$
|
1,245,710
|
|
Abercrombie
|
351,026
|
|
|
358,255
|
|
|
970,131
|
|
|
1,044,667
|
|
||||
Total
|
$
|
859,112
|
|
|
$
|
821,734
|
|
|
$
|
2,299,532
|
|
|
$
|
2,290,377
|
|
|
Thirteen Weeks Ended
|
|
Thirty-nine Weeks Ended
|
||||||||||||
(in thousands)
|
October 28, 2017
|
|
October 29, 2016
|
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
United States
|
$
|
554,673
|
|
|
$
|
531,449
|
|
|
$
|
1,434,019
|
|
|
$
|
1,435,633
|
|
Europe
|
192,698
|
|
|
187,184
|
|
|
543,578
|
|
|
541,711
|
|
||||
Other
|
111,741
|
|
|
103,101
|
|
|
321,935
|
|
|
313,033
|
|
||||
Total
|
$
|
859,112
|
|
|
$
|
821,734
|
|
|
$
|
2,299,532
|
|
|
$
|
2,290,377
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
October 28, 2017
|
|
October 29, 2016
|
||||||||||||||||||||
(in thousands, except change in comparable sales, gross profit rate and per share amounts)
|
|
GAAP
|
|
Excluded Items
(1)
|
|
Non-GAAP
|
|
GAAP
|
|
Excluded Items
(1)
|
|
Non-GAAP
|
||||||||||||
Thirteen Weeks Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net sales
|
|
$
|
859,112
|
|
|
$
|
—
|
|
|
$
|
859,112
|
|
|
$
|
821,734
|
|
|
$
|
—
|
|
|
$
|
821,734
|
|
Change in comparable sales
(2)
|
|
|
|
|
|
4
|
%
|
|
|
|
|
|
(6
|
)%
|
||||||||||
Gross profit rate
|
|
61.3
|
%
|
|
—
|
%
|
|
61.3
|
%
|
|
62.2
|
%
|
|
—
|
%
|
|
62.2
|
%
|
||||||
Operating income
|
|
$
|
22,740
|
|
|
$
|
(14,550
|
)
|
|
$
|
37,290
|
|
|
$
|
19,645
|
|
|
$
|
6,000
|
|
|
$
|
13,645
|
|
Net income attributable to A&F
|
|
$
|
10,075
|
|
|
$
|
(10,433
|
)
|
|
$
|
20,508
|
|
|
$
|
7,881
|
|
|
$
|
6,479
|
|
|
$
|
1,402
|
|
Net income per diluted share attributable to A&F
|
|
$
|
0.15
|
|
|
$
|
(0.15
|
)
|
|
$
|
0.30
|
|
|
$
|
0.12
|
|
|
$
|
0.09
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Thirty-nine Weeks Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net sales
|
|
$
|
2,299,532
|
|
|
$
|
—
|
|
|
$
|
2,299,532
|
|
|
$
|
2,290,377
|
|
|
$
|
—
|
|
|
$
|
2,290,377
|
|
Change in comparable sales
(2)
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
(5
|
)%
|
||||||||||
Gross profit rate
|
|
60.3
|
%
|
|
—
|
%
|
|
60.3
|
%
|
|
61.7
|
%
|
|
—
|
%
|
|
61.7
|
%
|
||||||
Operating loss
|
|
$
|
(68,290
|
)
|
|
$
|
(20,685
|
)
|
|
$
|
(47,605
|
)
|
|
$
|
(46,071
|
)
|
|
$
|
11,926
|
|
|
$
|
(57,997
|
)
|
Net loss attributable to A&F
|
|
$
|
(67,116
|
)
|
|
$
|
(14,958
|
)
|
|
$
|
(52,158
|
)
|
|
$
|
(44,835
|
)
|
|
$
|
10,158
|
|
|
$
|
(54,993
|
)
|
Net loss per diluted share attributable to A&F
|
|
$
|
(0.98
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
(0.76
|
)
|
|
$
|
(0.66
|
)
|
|
$
|
0.15
|
|
|
$
|
(0.81
|
)
|
(1)
|
Refer to
“
RESULTS OF OPERATIONS
”
for details on excluded items.
|
(2)
|
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. Excludes revenue other than store and online sales.
|
•
|
Comparable sales to be up low-single digits, and net sales to be up mid- to high-single digits, including benefits from the 53rd week and changes in foreign currency exchange rates
.
|
•
|
The 53rd week to benefit net sales by approximately $38 million and operating income by approximately $2 million
.
|
•
|
Changes in foreign currency exchange rates to benefit net sales and operating income, net of hedging
.
|
•
|
A gross profit rate down approximately 100 basis points to last year's rate of 59.3%, in line with the third quarter year-over-year decline
.
|
•
|
Operating expense, including other operating income, to be down approximately 1% from $553.7 million last year, with expense reductions partially offset by increases in volume-related expenses from higher sales and the adverse effect from changes in foreign currency exchange rates
.
|
•
|
The
effective tax rate to be in the mid 30s
.
|
•
|
A weighted average diluted share count of approximately 70 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
|
|
|
—
|
|
|
3
|
|
|
1
|
|
|
4
|
|
|
1
|
|
Closed
|
(3
|
)
|
|
—
|
|
|
(10
|
)
|
|
(1
|
)
|
|
(13
|
)
|
|
(1
|
)
|
October 28, 2017
|
396
|
|
|
145
|
|
|
304
|
|
|
44
|
|
|
700
|
|
|
189
|
|
Gross square feet (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
||||||
October 28, 2017
|
2,694
|
|
|
1,216
|
|
|
2,355
|
|
|
615
|
|
|
5,049
|
|
|
1,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Hollister
(1)
|
|
Abercrombie
(2)
|
|
Total
|
||||||||||||
|
United States
|
|
International
|
|
United States
|
|
International
|
|
United States
|
|
International
|
||||||
January 30, 2016
|
414
|
|
|
139
|
|
|
340
|
|
|
39
|
|
|
754
|
|
|
178
|
|
New
|
3
|
|
|
5
|
|
|
3
|
|
|
2
|
|
|
6
|
|
|
7
|
|
Closed
|
(5
|
)
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
October 29, 2016
|
412
|
|
|
144
|
|
|
333
|
|
|
41
|
|
|
745
|
|
|
185
|
|
Gross square feet
(in thousands)
:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
October 29, 2016
|
2,828
|
|
|
1,212
|
|
|
2,548
|
|
|
631
|
|
|
5,376
|
|
|
1,843
|
|
(1)
|
Excludes five international franchise stores as of
October 28, 2017
, three international franchise stores as of
January 28, 2017
and
October 29, 2016
, and two international franchise stores as of January 30, 2016.
|
(2)
|
Includes Abercrombie & Fitch and abercrombie kids brands. Excludes four international franchise stores as of
October 28, 2017
and one international franchise store as of
January 28, 2017
,
October 29, 2016
and January 30, 2016.
|
|
Thirteen Weeks Ended
|
|
|
|
|
||||||||
|
October 28, 2017
|
|
October 29, 2016
|
|
|
|
|
||||||
(in thousands)
|
Net Sales
|
|
Net Sales
|
|
$ Change
|
|
% Change
|
||||||
Hollister
|
$
|
508,086
|
|
|
$
|
463,479
|
|
|
$
|
44,607
|
|
|
10%
|
Abercrombie
(1)
|
351,026
|
|
|
358,255
|
|
|
(7,229
|
)
|
|
(2)%
|
|||
Total net sales
|
$
|
859,112
|
|
|
$
|
821,734
|
|
|
$
|
37,378
|
|
|
5%
|
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
554,673
|
|
|
$
|
531,449
|
|
|
$
|
23,224
|
|
|
4%
|
International
|
304,439
|
|
|
290,285
|
|
|
14,154
|
|
|
5%
|
|||
Total net sales
|
$
|
859,112
|
|
|
$
|
821,734
|
|
|
$
|
37,378
|
|
|
5%
|
|
Thirty-nine Weeks Ended
|
|
|
|
|
||||||||
|
October 28, 2017
|
|
October 29, 2016
|
|
|
|
|
||||||
(in thousands)
|
Net Sales
|
|
Net Sales
|
|
$ Change
|
|
% Change
|
||||||
Hollister
|
$
|
1,329,401
|
|
|
$
|
1,245,710
|
|
|
$
|
83,691
|
|
|
7%
|
Abercrombie
(1)
|
970,131
|
|
|
1,044,667
|
|
|
(74,536
|
)
|
|
(7)%
|
|||
Total net sales
|
$
|
2,299,532
|
|
|
$
|
2,290,377
|
|
|
$
|
9,155
|
|
|
0%
|
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
1,434,019
|
|
|
$
|
1,435,633
|
|
|
$
|
(1,614
|
)
|
|
0%
|
International
|
865,513
|
|
|
854,744
|
|
|
10,769
|
|
|
1%
|
|||
Total net sales
|
$
|
2,299,532
|
|
|
$
|
2,290,377
|
|
|
$
|
9,155
|
|
|
0%
|
|
Thirteen Weeks Ended
|
|
Thirty-nine Weeks Ended
|
||||
|
October 28, 2017
|
|
October 29, 2016
|
|
October 28, 2017
|
|
October 29, 2016
|
Change in Comparable Sales
(2)
|
|
|
|
|
|
|
|
Hollister
|
8%
|
|
0%
|
|
6%
|
|
(1)%
|
Abercrombie
(1)
|
(2)%
|
|
(14)%
|
|
(6)%
|
|
(10)%
|
Total company
|
4%
|
|
(6)%
|
|
0%
|
|
(5)%
|
|
|
|
|
|
|
|
|
United States
|
6%
|
|
(5)%
|
|
1%
|
|
(4)%
|
International
|
0%
|
|
(10)%
|
|
(1)%
|
|
(7)%
|
Total company
|
4%
|
|
(6)%
|
|
0%
|
|
(5)%
|
(1)
|
Includes Abercrombie & Fitch and abercrombie kids brands.
|
(2)
|
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. Excludes revenue other than store and online sales.
|
|
Thirteen Weeks Ended
|
||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Cost of sales, exclusive of depreciation and amortization
|
$
|
332,485
|
|
|
38.7%
|
|
$
|
310,995
|
|
|
37.8%
|
|
|
|
|
|
|
|
|
||||
Gross profit
|
$
|
526,627
|
|
|
61.3%
|
|
$
|
510,739
|
|
|
62.2%
|
|
Thirty-nine Weeks Ended
|
||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Cost of sales, exclusive of depreciation and amortization
|
$
|
913,085
|
|
|
39.7%
|
|
$
|
876,810
|
|
|
38.3%
|
|
|
|
|
|
|
|
|
||||
Gross profit
|
$
|
1,386,447
|
|
|
60.3%
|
|
$
|
1,413,567
|
|
|
61.7%
|
|
Thirteen Weeks Ended
|
||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Stores and distribution expense
|
$
|
375,944
|
|
|
43.8%
|
|
$
|
386,609
|
|
|
47.0%
|
|
Thirty-nine Weeks Ended
|
||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Stores and distribution expense
|
$
|
1,105,168
|
|
|
48.1%
|
|
$
|
1,138,644
|
|
|
49.7%
|
|
Thirteen Weeks Ended
|
||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Marketing, general and administrative expense
|
$
|
124,533
|
|
|
14.5%
|
|
$
|
105,307
|
|
|
12.8%
|
Deduct: legal charges
(1)
|
(11,070
|
)
|
|
(1.3)%
|
|
—
|
|
|
0.0%
|
||
Deduct: indemnification recovery
(2)
|
—
|
|
|
0.0%
|
|
6,000
|
|
|
0.7%
|
||
Adjusted non-GAAP marketing, general and administrative expense
|
$
|
113,463
|
|
|
13.2%
|
|
$
|
111,307
|
|
|
13.5%
|
|
Thirty-nine Weeks Ended
|
||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Marketing, general and administrative expense
|
$
|
343,779
|
|
|
14.9%
|
|
$
|
331,473
|
|
|
14.5%
|
Deduct: legal charges
(1)
|
(11,070
|
)
|
|
(0.5)%
|
|
|
|
0.0%
|
|||
Deduct: indemnification recovery
(2)
|
—
|
|
|
0.0%
|
|
6,000
|
|
|
0.3%
|
||
Adjusted non-GAAP marketing, general and administrative expense
|
$
|
332,709
|
|
|
14.5%
|
|
$
|
337,473
|
|
|
14.7%
|
(1)
|
Includes
legal charges in connection with a proposed settlement of two class action claims related to alleged wage and hour practices dating back to 2009
. See Note 11, “
CONTINGENCIES
.”
|
(2)
|
Includes benefits related to an indemnification recovery of certain legal settlements which were recognized in the second quarter of Fiscal 2015.
|
|
Thirteen Weeks Ended
|
||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Other operating income, net
|
$
|
70
|
|
|
0.0%
|
|
$
|
822
|
|
|
0.1%
|
|
Thirty-nine Weeks Ended
|
||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Other operating income, net
|
$
|
4,555
|
|
|
0.2%
|
|
$
|
16,835
|
|
|
0.7%
|
Deduct: claims settlement benefits
(1)
|
—
|
|
|
0.0%
|
|
(12,282
|
)
|
|
(0.5)%
|
||
Adjusted non-GAAP other operating income, net
|
$
|
4,555
|
|
|
0.2%
|
|
$
|
4,553
|
|
|
0.2%
|
(1)
|
Includes benefits related to a settlement of certain economic loss claims associated with the April 2010 Deepwater Horizon oil spill.
|
|
Thirteen Weeks Ended
|
||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Operating income
|
$
|
22,740
|
|
|
2.6%
|
|
$
|
19,645
|
|
|
2.4%
|
Deduct: legal charges
(1)
|
11,070
|
|
|
1.3%
|
|
—
|
|
|
0.0%
|
||
Deduct: asset impairment
|
3,480
|
|
|
0.4%
|
|
—
|
|
|
0.0%
|
||
Deduct: indemnification recovery
(2)
|
—
|
|
|
0.0%
|
|
(6,000
|
)
|
|
(0.7)%
|
||
Adjusted non-GAAP operating income
|
$
|
37,290
|
|
|
4.3%
|
|
$
|
13,645
|
|
|
1.7%
|
|
Thirty-nine Weeks Ended
|
||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Operating loss
|
$
|
(68,290
|
)
|
|
(3.0)%
|
|
$
|
(46,071
|
)
|
|
(2.0)%
|
Deduct: legal charges
(1)
|
11,070
|
|
|
0.5%
|
|
—
|
|
|
0.0%
|
||
Deduct: asset impairment
|
9,615
|
|
|
0.4%
|
|
6,356
|
|
|
0.3%
|
||
Deduct: indemnification recovery
(2)
|
—
|
|
|
0.0%
|
|
(6,000
|
)
|
|
(0.3)%
|
||
Deduct: claims settlement benefits
(3)
|
—
|
|
|
0.0%
|
|
(12,282
|
)
|
|
(0.5)%
|
||
Adjusted non-GAAP operating loss
|
$
|
(47,605
|
)
|
|
(2.1)%
|
|
$
|
(57,997
|
)
|
|
(2.5)%
|
(1)
|
Includes
legal charges in connection with a proposed settlement of two class action claims related to alleged wage and hour practices dating back to 2009
. See Note 11, “
CONTINGENCIES
.”
|
(2)
|
Includes benefits related to an indemnification recovery of certain legal settlements which were recognized in the second quarter of Fiscal 2015.
|
(3)
|
Includes benefits related to a settlement of certain economic loss claims associated with the April 2010 Deepwater Horizon oil spill.
|
|
Thirteen Weeks Ended
|
||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Interest expense
|
$
|
6,114
|
|
|
0.7%
|
|
$
|
5,751
|
|
|
0.7%
|
Interest income
|
(1,543
|
)
|
|
(0.2)%
|
|
(1,142
|
)
|
|
(0.1)%
|
||
Interest expense, net
|
$
|
4,571
|
|
|
0.5%
|
|
$
|
4,609
|
|
|
0.6%
|
|
Thirty-nine Weeks Ended
|
||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands)
|
|
|
% of Net Sales
|
|
|
|
% of Net Sales
|
||||
Interest expense
|
$
|
16,781
|
|
|
0.7%
|
|
$
|
17,099
|
|
|
0.7%
|
Interest income
|
(4,001
|
)
|
|
(0.2)%
|
|
(3,243
|
)
|
|
(0.1)%
|
||
Interest expense, net
|
$
|
12,780
|
|
|
0.6%
|
|
$
|
13,856
|
|
|
0.6%
|
|
Thirteen Weeks Ended
|
||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands, except ratios)
|
|
|
Effective Tax Rate
|
|
|
|
Effective Tax Rate
|
||||
Income tax expense
|
$
|
7,553
|
|
|
41.6%
|
|
$
|
6,762
|
|
|
45.0%
|
Add back: tax effect of excluded items
(1)
|
4,117
|
|
|
|
|
479
|
|
|
|
||
Adjusted non-GAAP income tax expense
|
$
|
11,670
|
|
|
35.7%
|
|
$
|
7,241
|
|
|
80.1%
|
|
Thirty-nine Weeks Ended
|
||||||||||
|
October 28, 2017
|
|
October 29, 2016
|
||||||||
(in thousands, except ratios)
|
|
|
Effective Tax Rate
|
|
|
|
Effective Tax Rate
|
||||
Income tax benefit
|
$
|
(16,062
|
)
|
|
19.8%
|
|
$
|
(17,540
|
)
|
|
29.3%
|
Add back (deduct): tax effect of excluded items
(1)
|
5,727
|
|
|
|
|
(1,768
|
)
|
|
|
||
Adjusted non-GAAP income tax benefit
|
$
|
(10,335
|
)
|
|
17.1%
|
|
$
|
(19,308
|
)
|
|
26.9%
|
(1)
|
Refer to
“
Operating Income (Loss)
”
for details of excluded items. The Company computed the tax effect of excluded items as the difference between the effective tax rate calculated with and without the non-GAAP adjustments on income (loss) before taxes and provision for income taxes.
|
(in thousands)
|
October 28, 2017
|
|
January 28, 2017
|
||||
Borrowings, gross at carrying amount
|
$
|
268,250
|
|
|
$
|
268,250
|
|
Unamortized discount
|
(1,470
|
)
|
|
(1,764
|
)
|
||
Unamortized fees
|
(2,870
|
)
|
|
(3,494
|
)
|
||
Borrowings, net
|
263,910
|
|
|
262,992
|
|
||
Less: short-term portion of borrowings, net
|
—
|
|
|
—
|
|
||
Long-term portion of borrowings, net
|
$
|
263,910
|
|
|
262,992
|
|
•
|
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)
|
|||||
July 30, 2017 through August 26, 2017
|
460
|
|
|
$
|
9.87
|
|
|
—
|
|
|
6,503,656
|
|
August 27, 2017 through September 30, 2017
|
7,524
|
|
|
$
|
13.02
|
|
|
—
|
|
|
6,503,656
|
|
October 1, 2017 through October 28, 2017
|
4,963
|
|
|
$
|
13.01
|
|
|
—
|
|
|
6,503,656
|
|
Total
|
12,947
|
|
|
$
|
12.91
|
|
|
—
|
|
|
6,503,656
|
|
(1)
|
All of the
12,947
shares of A&F’s Common Stock purchased during the
thirteen
weeks ended
October 28, 2017
represented shares which were withheld for tax payments due upon the vesting of employee restricted stock units.
|
(2)
|
No shares were repurchased during the
thirteen
weeks ended
October 28, 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.
|
†
|
Certain portions of this exhibit have been omitted based upon a request for confidential treatment, of the confidential information included therein, filed with the Securities and Exchange Commission (the "SEC"). The non-public confidential information has been separately filed with the SEC in connection with that request.
|
|
ABERCROMBIE & FITCH CO.
|
|
Date: December 4, 2017
|
By
|
/s/ Scott Lipesky
|
|
|
Scott Lipesky
|
|
|
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Authorized Officer)
|
|
*
|
Filed herewith.
|
**
|
Furnished herewith.
|
†
|
Certain portions of this exhibit have been omitted based upon a request for confidential treatment, of the confidential information included therein, filed with the Securities and Exchange Commission (the "SEC"). The non-public confidential information has been separately filed with the SEC in connection with that request.
|
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