AFTER HAVING TURNED out with the beginnings of a newfound challenging period for the Company, the 2013 fiscal year (FY) for Abercrombie & Fitch Co. finally came to a close on 1 February 2014. #THEHOTTESTBLOG now concisely presents figures for comprehensive understanding with elaborating perspective...
The Company has released its data for the fiscal year which generated total net sales at a negative of US$4.117 billion (-8.7%). This historically represents the third decline in revenue for A&F Co. in the Modern Era – the first two having being consecutively FY2008 and FY2009 after the onset of the Great Recession – and FY2013 is the first decline since positive progress began with FY2010 post-Recession. Significantly, the decline from FY2012 to FY2013, having happened in a post-Recession period, is actually greater than the decline from FY2007 to FY2008 at the onset of the Great Recession. Thus, FY2013 figures in as the second greatest decline in revenue ever for the Company.
Regionally, store traffic is cited as having significantly declined in the United States, which accounts for the majority portion of overall net sales, beginning in July 2013 and remaining a continuous detriment throughout the year. Performance in Europe has remained negative all across (with the exception of Scandinavia) and socioeconomics (including employment difficulties for working class youths) remain fickle. Nevertheless, modest improvements have been recorded and European operations continue higher than mall average. On the other hand, comparable store sales in China are at a fantastic 35% increase for the year; Japanese operations are robust; and the first location in the Middle East, HCo Dubai, is trending to be a top global Hollister location.
Breaking figures down, net sales were US$2.659 billion in the United States (down 14%) and US$1.458 billion (up 2%) internationally. Comparable store sales as a whole for the Company were down 9%. Comps declined by 15% in the United States and by 19% internationally. Total direct-to-consumer sales were up 11% with comparable DTC sales having increased to 13% for the whole Company up 7% in the U.S. and 25% internationally.
FY2013 did experience a minute increase in the percentage of gross profit from total net sales, 62.6%. This was managed with a decline in cost of goods to 37.4% of total net sales. This is comparable to FY2012's percentage of gross profit from total net sales – 62.4% – with cost of goods having been at 37.6%. However, gross profit year-to-year fell 8.6% to US$2.575 billion in proportion to fall in revenue.
With total operating expenses at US$2.518 billion (including US$81.5 million on restructuring charges do to Gilly Hicks), operating income came in at US$80.823 million (including other operating income, net, of US$23.074 million).
Conclusively, factoring interest (US$7.546 million) and tax expense (US$18,649 million), net income for FY2013 fell to US$54.6 million (GAAP) as comparable to FY2012's US$237 million (GAAP). Net income has reached an unprecedented record drop and low, in proportion to the year's revenue, in the entire Company's history, that was not even experienced during the Great Recession...
F I N A N C I A L F I G U R E S I N T H O U S A N D S
FY2013
|
FY2012
|
|
GLOBAL STORECOUNT
|
1,006 (by 1 Feb.2014)
|
1,051 (by 2 Feb.2013)
|
REVENUE
|
▼US$4,116,897
|
▲US$4,510,805
|
COST
OF GOODS
|
▼US$1,541,462
|
▼US$ 1,694,096
|
GROSS
PROFIT
|
▼US$
2,575,435
|
▲US$
2,816,709
|
OPERATING
EXPENSES
|
▲US$2,517,686
|
▲US$2,461,809
|
OTHER OPERATING
INCOME, NET
|
▲(US$23,074)
|
▲(US$19,333)
|
OPERATING
PROFIT
|
▼US$80,823
|
▲US$374,233
|
INTEREST
EXPENSE
|
▲US$7,546
|
▲US$7,288
|
TAX
EXPENSE
|
▼US$18,649
---
|
▲US$129,934
---
|
NET
INCOME
|
▼US$54,628 (GAAP)
|
▲US$237,011 (GAAP)
|
" 2013 was a challenging year, with sales and earnings falling well short of the objectives we set at the beginning of the year. After three years of positive growth and our combined U.S. chain store plus direct-to-consumer comparable sales metric, that metric turns negative for 2013, against the backdrop of a challenging retail environment, particularly, in the teen space.
The significant decline in store traffic that began in July continued through the holiday season, and as yet, has shown no sign of abating. Despite that difficult context, it is important that we return to positive growth, particularly in our core-U.S. business and the steps we are taking as we execute against our long range strategic plan, should put us in a position to achieve this goal. " – Michael "Mike" S. Jeffries, CEO
Traction in improvement, in comparison to preceding consecutive quarters, has nevertheless been felt as reflected in the fourth quarter (Q4) performance. For the full 13 weeks of Q4 FY2013, there was a 12% decrease in comparable sales (including direct-to-consumer) for the Company – comparable sales broken down to a 15% decrease in the United States and a 18% decrease internationally, though, as a whole, direct-to-consumer comparable sales increased 24%. This is figured in comparison to the 13-week period of Q4 FY2012 which ended on 2 February 2013.
" For the fourth quarter, we were pleased to see some sequential sales improvement, and that we were able to exceed our earnings guidance coming into the quarter. In addition, our direct-to-consumer business was particularly strong and represented nearly 25% of total sales for the quarter, up in all regions, with particularly strong growth in Asia. " – Mike
Looking forward, in light of high single-digit decline figures in comparable store sales and highly positive double-digit comparable DTC sales, the Company has now placed its outlook on full year, adjusted non-GAAP diluted earnings per share as falling within US$2.15 to US$2.35 – a margin higher than the prior guidance of US$1.55 and US$1.65 as given at the end of the first nine weeks of Q4.
Capital expenditure is expected to round off at around US$200 million for the 2014 fiscal year.
In regards to store openings in FY2014, Abercrombie & Fitch Co. anticipates sixteen full-price international locations. The most high-profile of these will be the inauguration of Abercrombie & Fitch on mainland China with the A&F Shanghai flagship store. Two additional mall-based A&F locations are now also planned to follow on the mainland as well as about three more Hollister stores. At only a stone's throw away from the A&F flagship, the first-ever standalone abercrombie kids international location will be opening on Savile Row in London in the latter-half of the year. Furthermore, the Company is highly encouraged to review plans for possible acceleration of Hollister in Japan; looks forward to expanding its presence in the Middle East with HCo. and also introducing Abercrombie & Fitch to that market; and is anticipating further penetration into the Latin American market with sights on Mexico and Brazil and also entering into Russia. A small number of outlet stores are, too, designated for opening in the home American market and abroad in line with plans for furthering outlet store penetration.
For other further planned initiatives, (see here).
About 60 to 70 more American locations will be closing within the year as natural lease expirations occur. Remaining European Gilly Hicks shops will be shuttered within the following weeks remaining of Q1 FY2014 as GH St. David's in Cardiff is slated to be the final closing in April.
"As we look forward to 2014 and beyond, there is much work ahead of us, as we navigate a rapidly changing difficult and uncertain environment. However, we are encouraged by the progress we are making, as we continue to execute against our long ranged plan objectives, and are committed to achieving meaningful improvements in our business." – Mike
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