ANF - Earnings call transcript Q3 2018 | Abercrombie & Fitch Co.

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Operator

Good day, everyone, welcome to the Abercrombie & Fitch Third Quarter Fiscal Year 2018 Earnings Call. Today's conference is being recorded. [Operator Instructions] We do ask that you limit yourself to one question during the question-and-answer session. At this time, I'd like to turn the conference over to Mr. Scott Lipesky. Mr. ahead. go please Lipesky,

Scott Lipesky

morning call. to Good quarter fiscal XXXX earnings and you. our welcome third Thank

referring today we the Operating on Also me earnings site and an morning, Joining at on is issued our release, Joanne will Executive Horowitz, we comments. presentation, to the on investor Crevoiserat, Web Officer, which Chief corporate.abercrombie.com is in site our our third under our available Chief our Officer. be available this call Earlier which quarter are Web Fran section. Investors

we I any Safe SEC make subject Before begin, remind our would you the forward-looking today like that to Harbor to in may statement found statements we filings. are

to In measures non-GAAP financial call. addition, be during we referring certain will the

non-GAAP this in release quarter compared from XXXX, X, I financial will XX-week measures Additional comp turn Also, a Fran. morning. the With fiscal period are that, ended details calendar and are issued call XXrd the to adjusted reconciliation shift over earlier third to the sales to of the due in resulting XXXX. the week included to November GAAP

Fran Horowitz

morning Good today. for joining Scott. Thanks and thank everyone you us

building across We and another quarter initiatives. growth with We improved performance. delivered making are comparable U.S. sales net our our pleased of business, strong ongoing transformation third quarter on income while with our brands progress

time Cyber seven double-digit We the I'm pleased positive top strong comps Abercrombie. also the start for leverage delivered the a eighth quarter solid quarter of Monday. This Day consecutive We in nearly holiday comps on quarter. growth, T-Mall for the on a saw to fifth of do rate expense is singles we of to in years a of everything first achieve top-line continue fourth November on center year. comp the keeping period profit Hollister positive remain the the the gross a marks to and for holiday for performance the our the from has track report focus Our with on season full off. at consistent positive company, growth day row execution peak company into to playbook sales of momentum customer operating marks pay fourth This growth our record on of to Thanksgiving and the carried this and comps. expansion in

our changes, Kristen established In of growth report company's newly brands all me. I'm organizational this we've Kristin addition globally announced Hollister President important to responsible Global President brand QX we will pleased the the as driving an to results, to appointed reporting Brands. Scott to for be morning the role

We also be announced Abercrombie that diverse individual she we'd grateful of to Abercrombie the & and company. will brand Abercrombie stabilizing made to brand. Stacia has President the the and President brand leading contributions I'm Fitch eliminated Stacia for the roles many Andersen Kids

of this we've brand As Kristin. combined into organizational to management part the of a cross also role leadership change, inventory planning an reporting

marketing will and customer place brand's the each strong brand our foundations the report growth to to remain in has With this to facing take critical in her and continuing has role. company our Hollister changes season, including part and marketing closeness of of are and as operations a merchandising, aim transformation customer the we obsessive factor So start Since global new and longer to business several refined driven on Her greater the design and Hollister's a ambitious in This consistency XXXX across earlier efficiency for I'm that Kristin joining execution stores change growth and the structures year. term consistent brands, Poor this branded functions driving management customers appointments objective. working of playbooks product the senior Kristin. and follows success continuing streamlining ensure on support and a organization agility, business of our business. to to Hollister's these development made and excited been President global in ambition. organizational of solid in holiday our our focus across

performance brands. the our of to Turning

continue to drive us order From product Starting across to we faster a we year across top and and record to aligning guys our getting and demand transition and our execution we're growth with well comp channels. product, to across to eight on third girls Across in experience now weather and a the categories now to a remain dressing. genders, Hollister's trends denims focus four voice customer, closer We delivered genders conversion increasing which perspective allows an growing in traffic of in product. fashion comp with and drove genders on with sales performance, channels. and an improvement demand in wear for Outerwear soft like colder has quarter fleece. trend a responsive bottoms an highly saw in wear strong for last performed

on set Gilly forward. our focused school assortment sizing to for about Hicks, quarter with a going fit, the Gilly in we're to strong received Turning potential and and back team see we is response excited the the

industry Secondly, music collaboration which also Khalid, our won anti-bullying Most Hollister's with our initiative. supports be we for to standout. recently awards marketing continues multi-year Live a Billboard

nation ambassador preferences school our is customer evolving well-positioned to close its our integrated really program, program, stride understand Our high and remain the about most. and trends approach now and expanding hitting they H concert school to core we through our issues high collective care

in side customer outs and overall physical presentation our Our Hollister of opened just in and this XX, with our Gilly driving investor continue our a new new experience shown part by strong side, side to ongoing we Slide Vienna, remodeled stores on base is investments our in This as stores side includes brand carve important engagement. be to by Austria. Hicks

Moving on to Abercrombie.

comp we progress our to sales. positive customer stabilizing of and X% to We product to leveraging are comp marking performance. trends. as in better fourth quarter consecutive sales a an closeness delivered the react brand's improving From our perspective, increase Abercrombie by encouraged the centric to customer playbook, the apply continue product its this quarter brand's we of are

For supply depth our more demand chain agile for fashion improvement Abercrombie, and saw We items early Based support able in bottoms reads, of on a we rompers a strength fashion see our were into and to good we shorts warm are and QX fall. we in jumpsuits, and denim. to skirts well with the throughout focused continual growing items key add saw on speed. weather response and prolonged fashion performing given

October, early items distort in we we holiday into set moved and certain velvet further insights in fashion those to taping. fall As to leveraged our sherpa

are the up authentic time. leveraging front, native marketing ramping marketing user places activities spend their digitally customers we that integrated the are On content generated in

a Our marketing is recent coat our example launch integrated ultra of great and action.

around has Slide As million illustrated on in launch of women. A&F, presentation, and ultra coat can than coats collection XX event Manhattan marketing From campaign and top environments some perspective on outerwear ultra and engaging see XXX everybody impressions men of Columbus. being prototype social. which you In prototype latest an first giant kids resulted you'll heavily media images shared strong our with Kids the in and experience just in Rancic across presenter and capsule season more both. an paid, featured our across we our network and The are had performing collaboration creating in earned investor that our in TV this new in her worn personality delivered sales both of and in quarter Giuliana our presentation, with here Duke also E! you and launch genders to the opened excited with based planned the appendix, categories another the son spring. announce collection Europe mall and we're for our see

our business the the comp brands, comp U.S. X% improvement solid to and trend saw sales sequential comparable performance as X% sales continues year Turning in top regional of of to Europe with across we quarter. the across positive moving weather through growth our cooled deliver brands on last international

mall-based shopping our prototype the the early just with driving Frankfurt. how I look We're is in to our digital act in and store gateway stores pleased forward additional mentioned, next performance Myzeil as incremental we sales. its an a opening As demonstrating in center brand month Manchester. We opened already European to it physical first

We learnings playbook continue market. apply and to the our European of Asian to the adapt

having program the of customer. international our success the U.S., the our we on is focus obsessive in getting customer local each our to leveraging As in believe closer markets, an We're key to market specific royalty timely, to local our and that on insights marketing. building data, and growing infrastructure be to ensure and processes developing better used teams planning, can our merchandising localized inform

Investor things. These Turning efforts. progress transforming delivering initiatives We're to the outlined initiatives in in the of X good our Day are at while April, top-line four on this growing our Slide presentation. while transformation improvement we on making

of In perspective. store performance right more new including optimization of we experiences leases the our XX now. renewal and of the By deliver XX% will time XXXX better we coming a delivered based some is network XXXX, fewer a we end we a design than store physical to sizes quarter, have productivity. for remain rightsizing is XX of on initiative new technology close in for continue with first third of store five for remodels stores as time, and integration our due XXX improved expected. Our to lease we end have closed on experiences our focused U.S. XX both journey now This been and of the we a stores total XXXX. same expect store At third up to XXXX customers than terms, XX originally on stores, our engaging fleet since approximately by fiscal stores the new driving combination and

optimize We sizes have to including our two a in-house network great right of best stores flexibility deal remodels, foreclosures.

global investments paying results. army delivering ongoing significant today child roll out the is off. our are Secondly, capabilities of The

and momentum to DTC During last global digital year. XX% saw compared quarter, geographies. the we both across brands sales The sales up third

digital mobile it for costs in third continue quarter. driven on sales to of and we transformation leverage Importantly transition three quarters to by the continues over shipping efforts. DTC traffic our The our accounted

our $X on still highly billion in traffic digital apps and growing are both track this currently exceed we're to Our Overall, the year. perspective. digital platform fastest sales sales rated from

shopping integrated. in-store experiences and well online Our are

up handheld on and We in-stores XX XXXX online rolled with Black now capabilities. it's availability order product across serve are similar am XXXX brands out experience. and successful respectfully. equipped positive of customers stores and It impact data technology was with are all in with the U.S. access already line allowing back I in Friday U.S. in-store of rollout this purchase tick countries. pickup also first being and to and capabilities globally customer in-store Poppins mobile the better our seeing mirroring loyalty delighted the strong to associates our busting with in

use increased supply overall speed, strategic Our including robust chain We're channels to and across manage focused and of and for countries. investing and agility base shoring efficiency initiative assort for near on third and diverse XX cultivation a sourcing flexibility we is the greater geography. capabilities in how across supplier in platforming

We how as focused our allocate an efficiency. anticipate buy enhance our are to tool. customer example improved us throughout doing inventory this rollout on demand supply how allows is across better we're stores. data also the of This optimization leverage we recent sign One chain to of and analytics we

Lastly, as effective to engagement. continue we focus on customer

getting of in delivers VIP initiative our group optimization remain efforts outlook customers Loyalty up Cali transmission and customers. of valuable of including year-to-date is our more support both to introduced core our summary marketing we who building shop our a global already critical about across program. brands. our engaged loyalty making to even In for with a more. of fourth accounts million new spend progress We've Hollister to while is a on achieve brands, ambitions the a loyal Our member with more spending recently it than of performance, close full rollout often our investment the aim it's delivering with year growth XX investments meaningful higher iconic insights the marketing long-term solid club this global track

to I Now quarter the the details over will and take through turn of to results Scott outlook. call third you our

Scott Lipesky

Fran. Thanks

our of progress. third quarter Fran results quarter another detailed, reflect As

last than Going week $XXX quarter sales detail, sales the were resulting more results in in comparable million the impacts third calendar reflecting adverse slightly from of percentage sales QX's percentage two comp of in of positive through X% impacted the and changes year from sales XXXX million exchange higher Hollister our which currency points. shift net top-line comp and X% positive X of adverse approximately for for approximately Abercrombie. $X or X% by foreign rates In growth X% point. million or reflects $XX XXrd

improvement international Our strong versus comp improvement quarter the in Europe. positive by business U.S. comp by with on business results of was sequential trend across saw brands a for performance X%. down with the were driven The comp of the comp U.S. driven of the The prior prior X% sales year top sales trend X%. quarter

business direct geographies. solid with is to and brands consumer Our growth strongly performing across

up quarter, costs. the constant year. slightly rate and currency unit XX DTC company sales profit XX.X% On a XX% driven last approximately For average to down last XX% total sales were basis to represented rate points basis, total higher was net flat XX% year. profit gross Gross was by compared of

year-to-date related indicator pre-tax other a the last non-GAAP from our I'll benefits adjusted constant quarter key basis quarter Our with our currency year. Excluded compared were income million is business. year certain compared third better to for coming excluding gross the improvement Adjusted to legal results quarter of profit due certain the a timing matters basis. impairment charges, up results legal than primarily last expense was pre-tax of our into healthier now the on adjusted to X% Starting to the approximately recap rest last approximately of year on in-store to investments. of operating operating operating asset of transformation million $XX expense. expectations $X

diluted includes approximately into to share customer standards was including income for change last gain investments rate adverse $X.XX including of adjusted net initiatives of foreign based year. flat traction efficiency and million. driving compared quarter was increase business. Adjusted The and charges from year-over-year approximately for year a operating approximately continue last from XX% $X.XX. in million from of Our The of in engagement currency the currency share that our $X and our tax to to $X income benefits went $XX $X.XX calendar compensation quarter marketing approximately improved tax related shift year. in benefits accounting Adjusted and to transformation foreign impacts effect $X.XX for the effective the to million last

outstanding $XXX quarter million Moving onto a and year-over-year slightly inventory $XXX We in holiday gross the ended million last year. key quarter with to the compared fourth compared balance categories. $XXX the $XXX in with million sheet. with clean up last in entering borrowings and depth We million ended cash quarter year third position the to inventory

Looking fourth expect digits inventory to the up at end be single low to we flat the quarter. forward of

We our leverage continue transformation inventory long-term to productivity. improve to ongoing initiatives

this profit XXXX Cyber achieve our As rate pleased operating our Fran we remain light In were performance, gross track Friday growth, we and mentioned, Monday. with on expansion sales performance Black for during to expense and of outlook year weekend full leverage.

quarter sales the and down comp quarter, and For to $XX single XXrd the as fourth week digits fourth we low XXXX's from expect calendar last loss foreign with be expected the from sales is impact the to in The well be sales adversely shift and of approximately as loss calendar currency. by impact XXXX's shift net reflecting of up single net the adverse impact digits XXrd to mid compared sales year net to the million. adverse

adversely impact to to approximately by sales $XX last year quarter million. foreign compared net fourth We currency expect in the

for gross to the We to to the compared rate fourth flat up of quarter profit be XX.X%. rate slightly expect XXXX the

changes down week quarter, due and and to is For XXXX fourth range transformation income operating shift in than from our loss reflecting X% other of adjusted rates and to the expense the XXXX's offset expected expense. in operating currency investments expense to excluding of in initiatives by expenses operating continued X% compensation reduced million the XXrd $XXX of fiscal lower calendar marketing more foreign be

to currency million operating quarter. $X in other the fluctuates in foreign to due approximately which income the exchange rates expect be We changes fourth

mid to fourth be the XXs. expect tax upper the in for rate quarter, to effective we the Finally,

for range expect to up capital connectivity our year and $XXX expenditures approximately million Moving systems. and selling accelerated improved investments the digital full our capital operations, we to sale allocation. platform previous be of as infrastructure modernize now on support from We in-store to point to

million and share year-to-date for dividends. CapEx CRM $XXX the year of and and provided Our million loyalty complete tools approximately shareholders XX approximately capabilities During and $XX rollout the plans channel million including $XX on Slide repurchases breakdown our through presentation. for systems new store A fiscal stores IT and to returned in updates period, of approximately include the the XXXX omni programs continued we is for

tariffs, our China from to dates. impact Turning have of apparel. direct implemented a to the peers, minor we Similar for the only plan to seen we rest tariffs to continue on tariffs potential

context from China. goods For approximately we in into the imported be XXXX, anticipate currently our U.S. XX% of to

production a to to apparel we diversified As supplier impacts including of we China potential gain have tools to around as to countries across available tariffs, potential new partners continuing and our additional more shift help clarity the XX out leverage base mitigate necessary. number existing potential of

the Quintiliano us will next I week to to back call to be our Pam Head would Relations. the Before as of like turn Pam welcome Fran, Investor team. joining A&F I

Some retail. of more comes XX Equity than you years of in the Fran? Director SunTrust specialty to covering of may at she Research Bank recently most experience know as community Pam investment as us with

Fran Horowitz

you, for quarter execution quarter. operating and rate solid had we're on track to a We start growth Thank to leverage product fourth Scott. this top-line including XXXX. remain growth, the expense year We to another of strong in improved expansion deliver off results

continue evolving experience customer deliver in the rapidly transforming model to best retail operating on a We our to environment. focus

around would operator that our with to you. pursue like I to Q&A. passion strategic Lastly, the and world the as associates start for of headed And Thank the transformation. thank all I'm our commitment we to their

Operator

Please Omar ahead take [Operator ma'am. Saad ISI. We'll caller sir. Instructions] our first Thank you, with go Evercore

Omar Saad

the Great Thanks. Two all questions. information Appreciate as morning. well. quick quarter. Good

also had fourth split other quarter, levers Abercrombie you positioning to the it in far? of combine from of quarter, have sense has much as positioning the does the trying low-single brand I do you, to wanted how why that for good given their comp at it of low-single the other that you guidance fourth have year Thanks. and each to confidence think And sounds think fourth still as make it gives in then what really around you you about all, Hollister about that given evolved brand there so that hand you like presidencies. in start had such for How a harder to digit two ask the guidance consolidate reorganization a and First especially great Are just you to guys makes digit top? gives starts last sense compare about leadership of function of kind the separate own those the brands the to presidents quarter?

Fran Horowitz

Hi, Omar. question. Good start morning. It's with first Fran. We'll the

comps to ready the we a feel healthy head a the stores around seeing weekend the it quarter, fourth holiday of mall lines. The in energy, like comp to last there lot to during seeing with out out there, we consumers seeing feel spent consistent environments promo the shop, the year. into fairly of I lot it's competitive feel obviously but environment to seeing time us So fourth time always as walking are and prepared we a quarter. we're does the spent

for starts strong called sellers. launch parkas a and a of Specifically some we've the a that our had our right win ultra to in clean, signs categories the in third the line depth results. and had must we grows best seen a We've as We've some We new the specifically inventories in good ultra of are for seen quarter head importance those performance into have off outerwear puffers. starting Abercrombie a strong the fourth positive we That's quarter. as quarter nice our categories. had

we've weather reaction Additionally, Sherpa. and seen as things nice got cooler, fleece to the like

is And date, performance to the our for in well. is of outlook our seeing total for the and in marketing in -- considered that we're that quarter all fourth strong year. Our as

continued continue your other building has with consecutive She a comp change its She Kristin to just brands, question that will facing are oversee products stabilized Specifically excited we row. track positive proved And in be A&F grow, her reorganization, the quarter to the comps. that our how really builder. their brand now fourth on foundations record Hollister all positive customer. to regarding in gets our extremely really and with to eighth a particularly teams with close to has business all delivered

do today that that a to right thankful for architecture. being we moving global able long-term in to Kristin So that. and very us we feel achieve stabilize ambitious forward built the did goals Stacia Abercrombie business is the helping to strong she certainly and our to work for assortment But feel person

Omar Saad

remain a And or at are certain brand brand to to there level the lot that going of of are functions consolidation going distinct functionality. the terms there levels be in brand are at

Fran Horowitz

consider The would functions that operational. -- I -- I we are consolidating back be will guess

branded. our example, will lead be facing planning brand for one inventory now under will all So all management customer but functions remain

Omar Saad

and you. team. work Fran Great Thank

Fran Horowitz

Omar. Thanks

Operator

All right.

Next with we'll go Altschwager Baird. to Mark

Mark Altschwager

Good quarter. Great. Thank Nice you. morning.

perhaps you First changed renegotiations just I just the then, of the of profile the how were prototypes quick mentioned is you're how Can just you the follow-up entering where initiatives for tier reorganization right that successful and give have seen And shorter closure curious sense to think a store for us release, SG&A term represent of think the landlord Or sizing plans a these in the [indiscernible]? you the these leases of discussing or some term longer Thanks. where your situations many impacts I new renegotiations? separately on contributing regarding your that growth leases malls a stores year. successful outlook. you lower the

Scott Lipesky

first evolution I'll is around impact the build long-term just grab how the of the here. structure quickly. Scott. and This one our Hey, organization going It's SG&A company. our to No on continued outlook we're Mark. a

no go real So change forward.

Joanne Crevoiserat

footage active since in we've our preference XXX digital very shopping square our the our stores fleet managing We've This and we've over and capabilities is We've store I'll up capabilities channel aggressively Yes, in customer change over pick XXXX. as the closures. time. Mark. omni watched several Joanne. managed our been closing invested stores

the to XX% has lot a That with allows negotiate It expiring flexibility do of of continue allowed of our stores by We us a lease are us to to leases end of or things. our continually that maybe U.S. It non-performing allow number on flexibility economically. does underperforming fleet. evaluate to XXXX. us with have landlords

We improved some landlords negotiations performance our successful with well the announced of negotiations successful changes we today fleet. as reflect have had that both as

the disposal at We just pay that have include we're store investments and our we and seen your are off very the not closures, focused and productivity. right tools on experience that driving terms sizes in but and to investments making of improving we've those productivity point

So customer fleet is focus that our really and doing been at time. on driving improving productivity store successful over in our we've And the experience.

Mark Altschwager

luck Thank holidays. best you of and the over

Fran Horowitz

Thank you.

Operator

[Operator caller Instructions] Lejuez next Paul the Citi. And with

Paul Lejuez

And thanks also each guys. in your for each the to maybe sense internationally? Hey, how you expectations Can came gross brand how U.S. international. brand us versus in a Thanks. margin about performed the U.S. versus in curious give of I'm relative

Scott Lipesky

Yes. Paul. it here, I'll kick off

had in performance both Hollister comp a On year. performance company we our the the been we and in brand of last bit the top geography. U.S. six We were six U.S. Abercrombie little the with outperformed has but trends consistent outperformed positive. the that on pleased mentioned brands total a comp which with very

So we performance. continue pleased be that to with

deliver slightly up outlook for us into has full flat year we and total But in we by this have to at brand pleased Our expect still with point, flat in the half. we to still slightly. performance flat our actually at of as gotten this we into QX, look generally FX last and an the flipped against we're that projection to up back forward gross year but outlook margin, here were of haven't

Paul Lejuez

the you. on look then, over Got anything any mentioned can strong to period? how promotions that start give quarter-to-date color And you holiday you

Joanne Crevoiserat

mention had start to brands sales between We on We through had the record fourth Thanksgiving Monday. we a did solid that quarter. Thursday

is a that We point environment reduce go promotions to time. with in seeing to into activity in each are compete. perspective We this go quarter year but at promotional opportunity an we the consistent from to also ready consistent but competitive last

healthy. we it the looks as environment today, see So

compete ready the we're inventories for Our clean to quarter. are fourth and

Paul Lejuez

Good Thanks guys. luck you. to

Joanne Crevoiserat

you. Thank

Operator

from Next comes Kanaga line question the Tiffany Bank. with of Deutsche

Tiffany Kanaga

for Thanks our questions. Hi. taking

and constant constant basis in a AUR XX fourth about into margin headwind. currency quarter you gross XXXX quarter currency gross the the still thinking is dig as into in in the Given would Thanks. point margin especially markdown you're rates decline and freight how for

Scott Lipesky

Yes.

up at QX XX The and and driven slightly was AUC that transportation mix of that neutral then basis. flat FX you Looking the specifically as mainly driver on down mentioned also by primary reported you was here a headwinds some a mentioned.

So AUR slightly on that enough up to but cover was in also not cost. just increase mix that

no real outs perspective. from a increased So there's talk markdown to about call

as is end up think talked on about we QX, for be the we'll outlook flat again, XXXX to slightly cover As to sure haven't that and we year about but yet call. the

Tiffany Kanaga

Thanks so much. right. All

Operator

with RBC. next will to Brian We Tunick go

Kate Fitzsimons

terms of sales U.S. begin Hi. what of you're on I customer business in for Thank in Kate tourist also appealing for Brian. local improvement internationally? that This in is just in the headway you're also speak on Thanks particularly taking could Europe? you making sequential could international And to then terms in you just any of the in seeing to and our questions. you. guess the first, terms if

Scott Lipesky

then U.S. that in mentioned piece. International we over Okay. strong a In America We quarter six it customer. we it U.S. U.S., The but offset with some softness the business kick comp the for the send and a a U.S. the I'll Fran off we very comp It's plus tourism had Scott. bit as to I base mentioned continues some that last more South tourism. in on to to of last top saw six Florida more see weakness year. business on than ago,

business. but out again, U.S. softness that we've have been of on Europe, the with the strong to We able coast a seen little overcome

the Given environment. geopolitical and currency

continue Fran. the into hand We our baked QX. over expect to in that's outlook this U.S. it softness for to I'll and

Fran Horowitz

Sure. Kate. Hey

second both as the improvement to from seasonal So as seeing both quarter. towards sequential brands. saw that well see it quarter as even end third we throughout Certainly the did of more quarter in quarter. We the weather actually third the turns

European did as we local assortment We leveraging A&F to from based sequentially. off we're prototype we There opportunity picture are stores. in and focused is our adjust We solid see a more we're opened future sort our But local them flags transitioning insights our stated plans. our first big overall in Hollister, Trafford. really to of know our But as mall now. our Day mall making to still you For see also improved grow start wear to and just low. international Investor our penetration

Kate Fitzsimons

of for guys. luck Best Great holiday.

Fran Horowitz

you. Thank

Operator

from next Nomura Our the Siegel question Instinet. Simeon of line comes with

Julie Kim

Thank your I is you This morning. for our spend seeing color as give Simeon. for thoughts up return more where next Thank the mean on allocated? on around year being you. Julie as of kind into looking that marketing wrap the you're Good we Kim well year. as you Could spend taking is question.

Fran Horowitz

It's Hey Fran. Julie.

have as a our seeing results into quarter spend all our fourth actually marketing I real sort head as the to our of our a increased integrating We've campaigns. nice lot work investments. done from We in we them of referred of on business. XXX

integrated connected Instagram to go mentioned very line strong even It's But every handover for in ultra the it's well. our Billboard that, our a we specific integrated With for the to you Scott. in-store school off. Our you or as TV see whether are one parkas. just Awesomeness that. whether Hollister launching spend strong coat our campaigns off We will came through show, Abercrombie, a I Abercrombie marketing e-mail. Music campaign new campaign is earlier what Awards had today, to back in paying it's channel We that for in

Scott Lipesky

is we quick continue we're Yes. into We've that those part increase return for our we've baked investment been to as understand through add on our And as year. going reasons great QX. really OpEx marketing. of all the effectiveness one to our the is transformation outlook. trying going into to there this and That move Say initiatives progress our made

So while we're giving making we're underlying return. that have effective a great more also we and us increasing is spend the spend sure

into that will again our and outlook spend. we increase the QX So is baked

Julie Kim

you. Thank Great.

Operator

All right.

Kloppenburg the Your Janet with next from JJK of question comes line Research.

Janet Kloppenburg

little quarter how the opportunity wage year. And and bit what People also if you further about on operating Fran, about you international you congrats the outlook for improvement about about A&F. may in at Good talk you. lastly turn for wondering morning, was performance. year. and talk -- operating accelerated if Hollister Thank I was slower progress nice that the margin everyone A&F store and little talk could you and that a could expense outlook et pressure, brand the to And next just pressure third other if is. wondering cetera a there outlook impact pressures saw are bit and a than your performance more on I traction the your for next great could talking

Joanne Crevoiserat

Hey, really in Jane. we the store jump international across I'm international first brands. business sequential improvement performance regarding the we driven in to Joanne one on as see by improvement in It's going the both did mentioned we as Europe

adjustments made but assortments weather some there, of the was move to a mentioned one seasonal now categories third also lift well. the earlier respond to our through we we saw through really Fran As third drivers those we move our as change certainly couple of the we the to and as quarter, customer as helped wear quarter

our a in shows of execute A&F to in business pay building store those but promise. digital taking that beginning closer getting the store. we're international initiatives teams markets the productivity our and moving internationally, and we that also in customers and early the the nice on in runway in to our to market closer around that right of we stages so Manchester out to see marketing has and this of very We successful those rolled are our playbook there We've it loyalty now. customer to the some We our lot markets see in opening future off. been focused We early programs expect getting U.S. more see we're our

some wide we know there's So for with the space that us particularly brand. Abercrombie

we As international as in pressure…. it open relates to markets OpEx

Scott Lipesky

side the OpEx up pick I'll Janet. here

our seen actuals the our distribution in here throughout consistent Those the on reflected year wage we and performance. our have in So year been a our distribution from and inflation wages throughout inflation in story distributor outlook stores. center have centers increases

that We store here. And we're part time competitive then, and issues the continue no in that to pleased operating be workforce mostly see in on markets side we're there. a the

to years come. we wage for to We've continue to and seen years see for this We expect this minimum inflation. see

to and XXXX baked So without XXXX inflation we back right getting in specifically about our goals made it bit Investor going little that to has Day we into don't this updates been talked a and that see the now.

Fran Horowitz

question. the Hey, of Janet, the part third take I'll Fran. it's

So we in row. comp are pleased positive with friend a you're the and progress that we continue to make off fourth coming a our

brand. seeing we journey on are for still a about we've positive really are the talked before. A&F signs that But We

health and year. on positive For and example brand are our metrics a internal putting external up trending

that and executing We all position are new is QX. facing her for customer forward. continue very even to those That into our playbook to moving with product closer the making into charge teams progress us and the brand outlook nice getting we baked will move Kristin really confident our in of

Janet Kloppenburg

lots of and the holiday. Thanks for love

Fran Horowitz

you. Thank

Operator

will Susan Riley Instructions] [Operator B. FBR. We with next Anderson go to

Susan Anderson

see little Nice data strong but wondering you on brand. categories. are accelerate nice maybe sounds the maybe it Any It's quarter. a you starting working Hi. Good look any was maybe talk thoughts performance there And potentially was looking into if also could or the Thanks. more if about talk And that then, customers comps the at customer. job like the morning. you what's bit see could even around, outerwear A&F other as to opportunity to the to maybe come the I you now brand. that continued better new and out

Fran Horowitz

is Fran. This

traction. cross-channel good brand in seeing are really illustrated we which -- it's growth So traffic our

perform U.S. in in to the move brand win that's business. bit We about as are both internally measured a well and externally. movement in We're our categories nice core health outerwear, seeing positive throughout We did grow talk we as also importance seeing the also as our year. strength must continue our and

seeing category helping We've program. be is that a call generated that a create responding launched the customer to had denim response nice fashion us where to. we're user well ambassador that well. that's solid as we We've Another as content really would what response to our category

are programs loyalty our Additionally growing.

We have fourth to be quarter. more members in our program than we did for last year

So compete we we prepared the quarter. to where for are are pleased with and fourth

Susan Anderson

Good luck so Thanks quarter. Great. next much.

Fran Horowitz

Thank you.

Operator

All we'll from last question Lynch. Bank David with our right. America And Merrill take of Buckley

David Buckley

taking our for question. Thanks morning. Good

and trends for to the just could XXXX stores saw outlook. you then Something U.S. looking you what's your quarter discuss the for -- traffic

Scott Lipesky

but we're growth pleased base brands both I'll grab Scott. both evidence for our -- the positive and cross-channel working about for Yes, growing efforts brands. we loyalty are improved traffic remain one. this think as store with We just marketing Fran mentioned traffic. view this our as

efforts earlier early investment In the us makes into that U.S. again also of working. AUR outlook with the which mentioned continue in Too And outpace our us end deliver that growth growth. we're continued the trying conversion end in includes our feel feel at mall continue to that can though to OpEx profitable year as trend are as balance that this We we to traffic And point talk at about call. XXXX this the we help QX. that the traffic marketing. we'll to cover in

Fran Horowitz

Thank you.

pleased team to our are with excited solid Coming is year-to-date end. weekend, and you for start to day. and with continued rate to excited expansion, deliver holiday forward our ready updating progress great ready quarter season. Thank holiday global support in We our are leverage have operating a compete top-line fourth and expense the growth in XXXX. interest the performance about you year and and gross and I on your profit to look

Operator

participation. everyone That again conclude does today's conference. their for We thank

Abercrombie & Fitch (ANF) 29 Nov 182018 Q3 Earnings call transcript