ANF - Earnings call transcript Q4 2018 | Abercrombie & Fitch Co.

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Operator

Good day, and welcome to the Abercrombie & Fitch Fourth Quarter Fiscal Year 2018 Earnings Call. This conference is being recorded. [Operator Instructions]. At this time I'd like to turn the conference over to Scott Lipesky. Mr. ahead. go please Lipesky,

Scott Lipesky

over it to turn Pam. I'll

Pamela Quintiliano

Good Fourth Quarter Scott. morning, everyone, XXXX our to welcome Earnings and Thanks, Call.

statements Officer; comments. Chief Joining me we is Officer; Operating that Executive Securities Fran the are issued Horowitz, Litigation could cause Scott safe today to on earnings forward-looking the Private of the made Act Joanne subject on These call mind our on the our fourth our XXXX. under actual be Crevoiserat, subject provisions release, this to Officer. Reform is statements any the investor an uncertainty corporate.abercrombie.com to call and website of are we harbor referring risks Earlier section. differ will Financial are the and quarter in contained Investors Commission. available Chief uncertainties the and and and mention from morning, assumptions at these discussion Please with to is in detailed forward-looking our presentation, materially expectations filings we Securities that of company's website Lipesky, on Also the A which keep today. factors Chief which available Exchange in the results

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

are to will morning. reconciliation included and financial over earlier the Additional details in to issued adjusted call With non-GAAP release of turn GAAP the I measures this that, Fran.

Fran Horowitz

the year our phase. we our has ambitious And growing us. and I Thanks, a year team full laid Pam. quarter in Good XXXX has to Investor year happy of am today. here completing out successfully for At and be discuss thank for us an morning, been fourth full while everyone, April, our results. joining to our you quite Day transforming It delivered, agenda. first

annual laser and full income. expansion grew gross adjusted leverage, top in of previously to XXXX speed XXXX comps, basis operating We important optimizing We EBIT Day, environment. improving over engagement year, store efficiency our while year and remain initiatives sales. and the a positive progress adjusted and consecutive our in second enhancing track we throughout target posting We highly omnichannel Investor including and and concept-to-customer our points. these our optimization. in playbook our experience disclosed that and product, result, of network, loyalty $X doubling adjusted aligning results importantly, margin. the profit competitive the expansion Throughout lifecycle delivered we margin sales. we net outlined product focused billion were through comparable points delivered and our EBIT increasing XXX rate Most sixth had our our fiscal improvement digital achieved a customer all drove consecutive expense We on quarter the on We deliver on making and As on capabilities, a marketing XX% a our comp digital we programs we line. touch transformation across our voice

center is customer do. our is always we and driving of the Our everything force

and them Our they engage customer branded and us. everyday them life, experiences wherever with provide however is there product to are choose be their We for a responding. to goal to that relevant whenever, is and the

our our a top comp delivered quarter we on of to accomplishments. ninth Turning comps. an XXXX, comp At positive quarter X% in fourth XX% of representing Hollister, consecutive

offerings And sherpa lined, closest record We quarter sales we anything girls jeans are louder at responded to fourth has marketing strongest our as had integrated needs. more including Brand-wide, outside, swim continued are continues Customers ensure the to and grown well so exciting loving leveraging we've to deliver. our revamped is our product product pleased their even and opportunity approach our an is we guys increased was for though us voice Gilly, Gilly continues and Hollister's spot in been meeting and foundation, fleece. speed and and that gender, customer Hicks. great and to with with outerwear both throughout resonate, pants. cold performance. across to effective and year, bottoms, and Our Swim to performance to with teddy, market grow. With cozy the including the our

been respond able customers We most. have preferences to to about the that trends, evolving issues the care our quickly and

about near Our my brand be to continue we customers COG marketing around care dear and and our centered causes inclusivity. to and deeply campaign heart like core anti-bullying and are

Our member nearly royalty XX this doubled to program Cali million year over Club accounts.

accounted Hollister's AwesomenessTV history. our swim series Instagram for XX most-viewed videos X and Our generated in more million YouTube Top collected brand's views, than --

more Moving outperformed, the In on In in led strongest strength. primarily women quarter, and driven weakness to jeans, Abercrombie. than X% outerwear. women, which tops offset fleece and pants dresses, our of was category skirts. Comps fourth and bottoms in men's, were areas strength genders by by and experienced knits in negative both

isolated about quickly we We product and Abercrombie while and made dresses inventory, talk our as adjusting progress the clearing on, assortments tops moving go-forward to increasingly flex want our have chain. Before women supply to the in good simultaneously continue missteps I challenges. agile

Scott all new promoted to the Kristin you was role Global Brands. recently As of know, President,

taking energized. from years, the in is late-November, the applying Over begun Hollister has couple an learnings amazing and on team the has job her past new of at done she Since Kristin Hollister. role

are of A&F. We the about excited future very

year, robust year-end, growing brand. speaks is of to at with power Abercrombie from last Our million the up program almost XX million the loyalty and accounts X this and member

fragrance our integrated campaign integrated continues relaunch product growing iconic by new activities sophistication fueled evolve, Fierce Abercrombie The recent While the team. to first from marketing hires. the scale, and are our is in of recent

remain updated speaks authentically same, today's fragrances the messaging While to more packaging consumer. the the and popular

and experiential to includes California mental activations firefighters. group that a combined of truly a LGBTQ in-store, and have digital campaign advocates health We diverse create activists, athletes, volunteer

since still its are that brand. the have all impressions sales from media relaunch us to tell new mark. in of and Fierce purchases we been XXX almost the reactions days, both over had half and early customers While million that has sentiment Fierce hit

You can Slide XX. certain our campaign aspects see of on

Turning to kids.

pattern updated We our our are responding are Flower encouraged prototype, results. adult products of big competition. and line and Collection unique like to our that The to to store and parents both gender-neutral Customers feel our our kids continues successes, and which bottom and putting product in wearing stores have relative by is recent Everybody are differentiated perform. it. to been good them

while XXXX, just While made significant year first progress the was we transforming phase. our in of full growing it

move leverage disclosed transformation our our initiatives on in fiscal a key be to target, of done. we XXXX is on stay into there X X, XXXX. As with previously we lot year rely and still track increasingly work To will

and customers, we initiative optimization Our an our remain delivering reflect and network. experience stores, store new focused running on evolve across first We of XX of highly and model experiences physical is With compelling, to habits prototype the making store brands. our to We've spaces delivered shopping we're rightsizes exciting our remodels. core the continued encompassing omnichannel-integrated. engaging more year, every our new new evolving, this and

XXX contributing approximately leverage. closures, square productivity stores, digits levels. to Over at point X%. X years, we we've XXXX's by low-single per current gone a year-end, improved closed in and store B In positioned basis foot past fleet to malls. X,XXX XX Meanwhile, a well A XXX store This the from square reduction from occupancy XXXX, domestic a in predominantly XXX footage roughly roughly our peak including leaving of total of stores resulted

for over years, the our ahead up XX% of us next X base U.S. lot roughly a of Looking giving is renewal, flexibility.

invest to the XX including entire continue experiences We additional close up and for to appropriate Slide presentation stores approximately new closing in will plan conjunction with experiences will when including refer our remodels are in Please store base XX stores, our carefully in store XXXX. and In XXXX. delivering evaluating in to XX we details.

to stores. The more line on Abercrombie we consistent high-single-digit investments brands. in of kids journey, Hollister of remained prototype prototypes which and embarked in hope improvement the our has the adult have XXXX. remodel you I store to years, closer in should end in in recently XX% over XX% has the is return and the our been new XXXX. top be Turning format updated our base control versus launching introduced that Today, prototype, on of by the continue we the and most its see to XXXX. updated roughly

is productive. XX% combined Although, in the than formats highly fleet of new these in proving -- in these less stores are these general,

domestically both learnings fleet should applying year-end XXXX, of the prototype. internationally. are And XX% approximately and Abercrombie and new We by reflect kids combined the

Shopping and continue many in two and On digital first where from our the mall-based locations, Centre our large flagships international do pivot To have Manchester; the presence. base powerful in the Center local experience in In mall-based the a to mall in drive overdeveloped, and we omnichannel opened incremental base fast center smaller-format customer is stores, to us more European play not we enabling XXXX, the not customer. U.S., sales. prototypes role currently cultivate we front, A&F clear, be Unlike MyZeil for at and tourist-dependent we leaving key delivering believe the shopping Trafford a to a away Frankfurt. they European

We still physical space. specialty the to are retailers one of committed in investing

We're are landlord XXXX support margin our Our our formula part a remains fiscal our on helping store direction excited to to highly EBIT and key about which achieving acceleration. optimizations, goal. our are partners of focused

investments for and focused omnichannel anticipate proactively to our this our basis. and shopping on to been significant our Turning enhancing a needs digital second a initiative, made while capability. global have We've customer on

passed broad-based and For across brands digital digital $X in and we milestone, a the geographies billion year, momentum sales. experienced major

first, of our dollar and traffic Within digital our from majority customer a the with apps the our both digital rated for platform is our sales perspective. fastest-growing mobile mobile traffic platform, and overwhelming and accounting representing highly

strong POPinS digits becoming in Sales both which make online, customers while Our to are we up order incremental purchase purchases We referred for in and increasingly and the store, experiences engagement store. double integrated. shopping and POPinS in-store as see digital with pick in-store up are capabilities.

are rolling capabilities and these available globally, they are across countries. brands We XX now in out

currently the websites world global to As we a operate around countries. a over We and ship highly reminder, XX developed have infrastructure. XXX

performance success where had a on we've China, saw strong addition, Day. In Singles' Tmall, on we

and support across of these I tools drive we in XX% the and further sit proud than investment to to shopping cannot accomplishments, continue in in ever, brands While penetration digital XXXX omnichannel in is our of will we beyond. functionality still. States XXXX, growth and the platforms am and including faster digital Innovation

increasing Our and through we efficiency across sell greater capabilities allocate third initiative focused for and plan growth plan, have and several in the by to have speed, weeks. agility From our calendar profit geographies. countries. and and and In lifecycle, perspective, invested expansion. including product is we we on channels our that support base how capabilities successfully speed-to-market our buy, is product concept-to-customer we product improvements, cultivated help and supplier AUR these shortened flexibility result diverse a XXXX, across gross efforts The XX robust and expect rate have buy

XXXX. analytics Another We to the efforts, within and throughout lifecycle. this implementing markdown leverage to and support key is initiative our XXXX spent better buy, sell size X key tools allocate and focus data analytics product of in begin capabilities their to management these We'll tools our These realize rate support optimization. further brands for tools, across benefit profit inventory along critical gross and our the benefits will expansion. outlook ship-and-store

transformation I our touch Before on to fourth initiative, turning China tariff. quickly want to

the a customer experienced and half to to see in diversification production go team and ability we engagement. of detail up migrate And initiative, countries monitor transformation but will working regions. out continue into that is of have final will We currently on on our his closely China to into now highly remarks, to other the situation. more actively Scott

the We loyalty improving this program almost our big in surface growing year we as doubling our through on member to past further programs strengthen opportunity, XX released marketing view continued, and the loyalty continue personalize engagements initiative. loyalty an to our We optimization engagement to customer even as our million brands. with customer leveraging and our over we're our new data membership our asset and just with benefits. Momentum scratching communications accounts, focus over bigger and a on programs

at most The multiple year, improve pilots our front, marketing ran to effective our return the capabilities platforms. channel. step-up the XXXX, the spend our a developed over the marketing across across our investments better efforts in marketing the outcome pace. read the delivered although, loyalty XXXX health are comp XXXX, across able is further improving moderate and had test-and-learn that cross-channel all we'll traffic our spend more and continue we positive increase spending past on We in allocation in In On to a we and of the and to brands. brand and

materially our these am comp and our profit efforts. we gross proud that trend profitability. performance. XXXX on build of continue In while positive We expect year rate summary, of to We I another improving as sales, expanding delivered

discuss of over our the full Scott I and fourth the to Now turn quarter outlook. results to call will and year details

Scott Lipesky

good sales of X% to excited to from and outlook and Fran, end our for everyone. the fourth through our morning, with year Total net Starting the Thanks, XXXX. I'm $X.X walk year. you last billion declined quarter. strong

we at year. approximately fiscal against a a most combined, positive plus shift XXrd exchange quarter As $XX reminder, impact consecutive XXXX's additional of adverse calendar week rates. a of sixth had loss $XX representing our sales Comp the from X%, million foreign of and of changes difficult comps in our impact came in currency the and million adverse an comparison of

of comp driver and continue which Our positive loyalty key the traffic, investments deliver to growth. marketing cross-channel our was

QX. while disclosed through and are and X%, Abercrombie demand tops aggressively sites. weakness we in positive and classifications, negative By driving underperforming to in the as Tmall margin saw dresses the U.S. X%, China, in comp and Our are outlook. comp, were sales continue sequential International Abercrombie largest was reflected in efforts across comps flagship a women's continued Europe, challenges. a the Hollister, Hollister, In representing by X% sales Kristin digital X% previously brands, geography, improvement our sequential these offset ongoing of locations. working on brand, we owned our improvement reflecting achieved team we business on focus had a from and our negative was strong In

the surpassed annual channel. in we for mark Fran sales billion mentioned, digital $X the As

hedging, recap total rose digital XX.X%, constant total a XX rate brands across up sales the of approximately profit quarter, compared currency with to from On year regions. sales net in sales year. For of grew XX% points basis, basis adjusted XX% to points, of AUR to non-GAAP essentially by Gross last QX year gains in and last I'll gross last profit of with Abercrombie. slightly AUR, rate to offset basis flat and quarter was XX driven the Hollister now AUC an up AUR compared rest lower our for results lower basis. in higher by on the

approximately pretax adjusted impairment. from results XXXX matters asset Excluding quarter approximately our million in $X and $X related certain legal were charges to operating fourth million of store

per and was and As for Tax currency to a tax last in higher additional year, the to $X.XX excluding operating there offset was of Act. impact the adverse reduction week year diluted at loss no was impact and changes from to $X last $X.XX. last share rates, XXXX's $X.XX down $XXX of well store and included calendar this million last as Jobs on from foreign year, tax of expense occupancy IT items benefits related Cuts foreign included in reductions adjusted the were of $X primarily a due shift in additional operating an reminder, The to of pretax and well sales million at depreciation $XX This quarter $XXX assets. year. changes estimated million. income additional foreign increased impact million from adverse effective Adjusted in and was Adjusted income net XXXX's as rate changes to and impact an from QX which shift digital partially by the the expenses. XX%, compared approximately loss Adjusted as impact $X.XX X% adverse other week as volume-related week currency expense excluded the calendar operating currency excluded estimated year, of million marketing approximately income in a net adverse from was and compensation compared expenses the

XXXX to Turning full year results. our

resulting comp a from points. was at last last by excluded year driven in rest AUR were asset results net by was basis operating year, constant-currency Excluded billion, matters lower we tax by operating was Adjusted awards expense pretax expense do per Lower $X.XX profit lower expiration basis. XXX to to slightly from not compensation last hedging, gross operating operating expect of was Other share impairment. expiration XX to $X.X points year, and of of impact expense card income and Abercrombie, foreign expansion. The the additional in sales offset AUR. Cuts income XXXX. loss $XXX the non-GAAP certain million benefits year, an margin operating of to points to AUC X% adjusted X%. while in charges excludes legal the fiscal our XX XX related points tax profit million up were XX million Hollister. was million $XX currency to on results the marketing sales EBIT year million, approximately up mentioned, estimated points breakage which offset effective basis were up rate Adjusted benefit rate approximately includes basis, legal discrete tax of transformation and X% was basis The basis million initiatives. of charges including from year basis full-year certain tax our by rate Net compares from was gift investments the of revenue, $X XX%, reflecting a in of profit discuss to income positive and rate contributed matters last expansion $X adjusted rate and our experienced million impairment. growth, charges certain As the week of partially last income of materially approximately from offset noncash impact $XXX the XX.X%, now I'll resulting partially 'XX beginning at fiscal last Gross year. was diluted operating supporting $XX compared On net while million. in of AUR sales to partially leverage, Tax XXXX of still the adjusted grows of asset of our of deleverage, at This gross into reclass leverage, compared Jobs adverse other related the Fran This XXXX. $X.X which related provision awards. higher Adjusted $X.XX net share-based excluding last discrete $X.X compensation approximately compared related for share-based Act. year. We to in

approximately diluted adverse was additional by $X.XX. fiscal benefited the partially approximately of net loss the of at impact per $X.XX. week in estimated by currency share the offset 'XX income Foreign This

year at with We both year year. compared to coming borrowings Turning million inventories and the the year, in million end of the quarter. into to up the last the outstanding were cash in $XXX compared balance sheet. $XXX X% million to Gross last Total ended XXXX. our XXXX $XXX expectations with for line were

end the at digits. to first with expect low-single We quarter inventory

While there balanced that tops must-win are brands first season, and entering women's investments teams must-grow this still across clearing was select quarter inventory carryover Abercrombie the overall are well in with position dresses our strategic categories. and our

on to our fiscal remain at for deliver that our XXXX. Day EBIT outlined The we Looking margin formula ahead, we track Investor XXXX consistent target. remains

For year, growth, margin net rate profit expansion. expansion EBIT once gross sales we expense the and deliver leading to leverage operating expect again, to,

offset be average of rates retail the to Specifically, adverse million. single in for to the contribution, cost. up low net by sales currency new adverse of of partially XX.X%, changes store by be sales up up unit of to net foreign the sales approximately be profit in higher net by we range $XX foreign average expect slightly impact currency Comp positive to XXXX the rate gross and unit of X%, higher comparable X% to year digits, in to with partially driven rate be offset impacts

potential any of impact China tariffs apparel. the on future excludes outlook Our

path to China-sourced are wait of amount the forward, into the to we goods understand flowing we the continuing While U.S. reduce

XX% China in under XXXX. our to XX% from approximately percentage in XXXX to We move expect

gears other We rate tax approximately the while and to operating operating expect allocation. income mid- still an we X%, driving expense capital Shifting to be leverage, XXs. expect excluding further expense up effective in upper to

we our $XXX million plan. capital our opportunity to transform from to business, we support and throughout discussed $XXX plan million As increase our in grow tremendous XXXX, to investments approximately and to XXXX see growth

and/or technology for stores liquidity, investments. will real our Our including the $XXX we for With spend remaining shareholder $XX pursuing and investments accelerating approximately as in dividends, will driving and include million flagships repayments. estate investments share our opportunistic million rationalization approximately digital capital debt business, through repurchases excess follows, returns and aggressively prioritize

of with For plan effect share we XXXX. I'll quarter expectations offset of finish a minimum, compensation for up share-based repurchases, to the awards. at dilution now our the first of

approximately operating to to expect $XX We rate; net be to flat rate sales to year, currency; other flat last XXXX adjusted $XXX last to up operating to profit to million X%.; slightly XX.X% of income, up including flat the approximately to foreign from year's flat be of million. sale to be adverse be comp gross expense, excluding operating impact expense

the expect back tax mid-XXs. we that, turn Finally, With I'll an over Fran. the effective in call to rate

Fran Horowitz

transformation XXXX Scott. and first of foundation, building our are on to executed for that as on growth successfully each in place to growing continue invest initiatives, plan the a recent phase. you, Thank brands. us transforming year full put over of We marks we strategically With momentum, global drive while enabling and a it. we'll to

future, Thank as We you. associates and excited our about would to with express passion along around so my and continue for to we our journey. I gratitude their all globe commitment, like personally the are the

Pamela Quintiliano

comments. Fran. concludes Thanks, our prepared That

happy now take will be We [Operator to your Instructions]. questions.

Operator

question And [Operator research. first with from Citi Lejuez your comes Instructions]. Paul

Paul Lejuez

sort for Hicks. you did Question comp online maybe What Anyway up product of is what well? are can business stores And in many about lift Gilly your us remind of size for it 'XX. how F Gilly plans F us, 'XX? as that big provide? that how Gilly in curious, the And business had an

Fran Horowitz

question. I'll Paul, kick that it's Fran. off

very It's phase stores opened success XX and seeing acceptance very But We we for growth as and globally for accelerated which Gilly. are customer, the actually the Hollister revamp we're the and year synergistic and this product back-to-school different our we So X an We're really 'XX. product trying did with and so has all half. up XX, lean continue back a on test up we Gilly to around currently carry in we with. actually we're our to of example, test nice we in opened through in world. in to much going so nice customer side-by-sides, them carveouts concepts, the head

Scott Lipesky

in the a and where -- Gilly in there, brand. just and separate Paul, additional Yes, are have, XX about will those scheduled, and XXXX, then the carveouts to XX add-on kind a are entrance a more around we the marketing we little to additional side-by-sides, open side-by-sides stores and of, XX

So it's a nice way to get to the customer.

Operator

Our next question Capital comes from RBC Kate Fitzsimons with Markets.

Kate Fitzsimons

out do of if peers. by you to low-single-digit you And the see guidance in some on to in for XXXX on the speak color Any then low-single that be just would your taking place We've Congratulations or could guess just region seeing for brand be my to heard flat improvement get here the the helpful. through would leverage outlook you're quarter. year? QX you QX. what of question what of compare digits you February? chappier some up I to comments Can that to

Scott Lipesky

kick All right, Kate, with QX. I'll off

you know, quarter current As the on we business. don't comment

The of Europe, weather the potential coming. impacts. is tourism and U.S. and quarter-to-date Easter For is We as we're March the X, in cold. bouncing to is here laid our we around trends is that. our the sitting reflects situation That up up quarter, be in any we are X%, The sale assessment to shift on comp outlook, the outlook that as flat for is out, on focused delivering and macro know

for outlook things for our it all to the try QX. we of I'll those So to into levers. reflect kick Fran

Fran Horowitz

prepared Well, we're comp comp. definitely to the

remains very in United States. customer Our solid the

from excited tops guidance. business. far. we loyalty also seen with continuing engaged lots a all our are then our in some brands. where are And We We that invest into our marketing our very that We're know, spring as to heading the obviously and lastly, is. Fierce. omnibusiness, our our We that's we inventory that. we We've so recently, about very and into stores categories had 'XX, positive in We near and see with We're relaunched dresses acceptance head strong campaigns. into of across as pleased strong We've challenges, mentioned you as and doubled selling baked very nice numbers we're our and about those and integrated term 'XX excited of to customer have our 'XX.

Operator

next We'll go ISI. Omar Evercore to Saad with

Shayne Arcilla

more A&F last This trends Arcilla I And like also, provide summer? the you color color evolved? especially ambassador provide on brand kids -- brand the programs, the you Saad. evolved Omar for performance on Shayne started is could trends and of how wondering have I'd Abercrombie that your know ambassador you have for was if could to more how

Fran Horowitz

with This is kids. Fran. I'll start

pleased into and parents to and kids to We've love it. continuing this pleased So year customer, news overall, had, obviously, and had the but with with with recent are There's performance. on we prototypes, move love kid are responding product are the learn We We parents our there share some and The believe that our seem that's our we up market has based forward kids We're putting opened some to them business, very excited both our performance. that there. opportunity. and a business things productive solid in be as our really test experience. kids. our our out to seems out it, wearing to

have exciting We we program. ambassador We said, get brand School program, a we influencer, Fierce board relaunch using still very we're of influencer the that with program launched. closer customer. that our of fragrance program a brand which program, -- board But a first-ever our High successful to directors lots understanding, -- or of successful our Hollister the consumer transitioned A&F, with have our what actually to created, current our through we're is of has calling, been recently sounding ambassador Ambassador and

Operator

go next Instinet. We'll with Simeon Siegel Nomura to

Daniel Stroller

Simeon. quarter this you the any is And then Dan the Could color what is and how Stroller trends? for on also, the Yes, then performing tourism comp give traffic cadence any for overseas? on

Scott Lipesky

our this delivering in grab for three in the I'll the hardest were comp the We We breakdown one. comp on pleased X. don't cadence This last get plus the the QX, with is results year, from Scott. QX. monthly plus

So comping good momentum comp us. for was of the show a

the I'd the and last think America. U.S., this environment East dollar. about as say Coast as geopolitical pretty Obviously, the Asia weak compared is from the we difficult about As the into it's well currencies along in talked of quarters business, there, Europe, couple been down are tourist out South seen to the we've tough challenging tourism we've Florida, US

I that's contributing tourist So pattern. to all think the

Operator

We'll Susan B. Riley go next with to FBR. Anderson

Susan Anderson

issues you bit for U.S. better breakout just the brand? specifically when missed you comps a be you Sorry, saw of the if guys And fixed? I expect international and performance guess between hopped and product this. in to U.S., Was can you kind of and wondering, had the in by the about kind that later. on I the U.S. Abercrombie, I talk just that if the

Fran Horowitz

A&F yes, than I'll the U.S. for in second did our kick actually with question. off better we international A&F the did With specifically. business, we perform

comp, A&F we Although, are excited did the positive the for and see really year to stabilized. brand

business. we those dresses We women's believe have to -- in specifically the isolated issues tops and have that

about XX Hollister been team heard and to the in applying We the Abercrombie. are learnings with really have for and lot you've her President. we excited, our evolve helping dug and at in Brand super She's days the product us in now. the a helm at that sure Scott job has She's of Kristin Global playbook the

back year. see improvement, really expect and each of that we'll in the handwriting delivery, her see We half we will the

Scott Lipesky

the U.S. grab on the comps I'll Yes,

XXXX total, that On plus we point. the the comps QX with from performance to the be seen down across was happy brand plus we've U.S. delivered But to brands. the of haven't In on in continue XX 'XX. this the in of the -- at in very we and total a QX given X level the U.S. piece,

talked tourism strong in U.S. U.S. to and delivering that in see of difficulty some So light U.S. ago, of that a we're minute remain customer Fran mentioned, I in continue about that still solid the as comps

Joanne Crevoiserat

jump was on I the to international. going

As -- Joanne. mentioned Scott this earlier is

Shopping the local, of local X there to Trafford, the the locations the business those mostly internationally, mall-based was strategy flagship markets in locations We for in move. bit more Hollister we in the in us is business continue mentioned were a mall-based open MyZeil Hollister improve moving And cultivated Abercrombie business into for accelerated the goal to moving opportunities customer our a omnichannel of flag markets encouragement more is mall-based and is softer these brand, a for is Scott internationally. Europe Europe As and pursuing improvement a into and Center that for Abercrombie. did gives customer international exits more mall-based earlier, in pursue and the we'll our a right but business our start in cultivate did more locations local that A&F in -- -- was softer,

Susan Anderson

think And quarter? add follow-up did drove if pretty there. or better over it you Hollister I pressured could Is just [indiscernible]. Because macro this continue X guess, the, that? the I that allocations you What to think you that do issue business in on just be obviously, product

Scott Lipesky

You or about international Europe are talking business?

Susan Anderson

Hollister, yes, In correct. Yes.

Scott Lipesky

into to first little the product transitional weather and bit. started year we three stick year some throughout seasonal we've they the more of that talked QX adjustments issues of QX a Yes, into throughout as became and our of made, quarters the the

we've seen improve macro that So in business bit. seen a across all little the We've uncertainty of countries. that business light European many

future track in be for and us opportunity place focus and good good voice better products a XXXX. on to we're the across our So we more that'll to a in much and localize have Europe, our here,

Operator

We'll next go with Morgan Stanley. Kimberly to Greenberger

Kimberly Greenberger

could how and magic ideal question. you I Great. you to wave profitable? sort now fleet would current of is a wanted fleet wand to a stores close? your downsize ask many What estate your if size, of your the percentage And of real

Joanne Crevoiserat

this that is up. Joanne. I'll Kimberly, pick

is vast fleet store the profitable. our of Now majority

of a in our box, improved drove experience, our the of many, the closed the XXXX, optimizing to B And fleet. been our occupancy. of basis use years, to But malls. would one footage, for health XXX performance, X in remodels, that's of better reduced years, tools path important that is A leverage many XXX and stores. say past improving square economics evidenced improve rightsizes closure and the in I believe this you matter evidence store we've -- customer higher we know, and our and by many improved performance, As and productivity we in roughly majority the and fleet improved still It fleet over the that and we is we store And on including note and the of relocations. we've is stores we we points store

continue we're embedding our a We over methodical point in footage committed continue and touch rigorous of capabilities, productivity way. lot of square the board. improving fleet with that have flexibility and the higher next our physical reducing to a XX% for to very across omnichannel our our But to years of driving to expiring leases customers, review couple

Operator

to go We'll next with JJK Janet Kloppenburg Research.

Janet Kloppenburg

the differences you of in Fran, now And the I to in how recognizing will in that, when European or expect with respect we many Europe, talked what and Europe to year? this the terms you see can flagship where about I'm wear And the like A&F localization closing the products of between Europe, talking Europe we more flagship transition brand? look U.S. cadence the Joanne, seasonality might that think wondering about and A&F expect closings, for was do Joanne assortments? and the -- efforts

Fran Horowitz

Fran. with question. off Janet, first kick the this the of I'll part is

across the business as our mentioned, saw improvement So quarter. nice to Europe in some we third Hollister the in fourth from we mall-based quarter

to We're are Europe product domestically, were consumer. we working conversion drives As and we creating merchants traffic aligning little Scott on for closer and is playbook we on playbook also and have a and a the that working operating mentioned, in to was are What product bit more currently a more the and global sticky, we have exporting seasonally us, which appropriate. experience, more model overseas. voice here

are out efforts those of through All XXXX. rolling

Joanne Crevoiserat

to flagship we omnichannel it our local to a closures, as is Janet, And more goal these relates the cultivate mentioned, as customer markets. in

of its set March. facts store in tourist mention has but for build opportunities the each exits So Europe. own local that year business across we definitely our more to and customers our and flagship a pursue help and locations also complement those But store exposure. will is Copenhagen and flagship continuing circumstances, that closed strategy. accelerated and flagship's, that want to this lease that, digital mall have We're openings to locations I locations in closed attract terms,

at So this more time. we nothing we continue that report to but pursue have closure, than to

Janet Kloppenburg

I every through gradual there slowdown as should the go we be next But a five closing, mean year, gradual Joanne, years so? or

Joanne Crevoiserat

locations as flagship own I Well, and circumstances these of facts of each has has a mentioned, and different landlords. its set

the Europe. Kong So to we that local manage in our customer more Copenhagen. attract -- And landlords and process evidenced with in our moves localized Hong we're more as made by to and that, with as working complementing help mentioned, the bolster we're and in markets openings I business

Operator

next We'll Bank Buckley David go of with America. to

David Buckley

you XXXX. freight Just growth can beyond interested for expense drivers for of And first wage outlook then hearing the operating and in your expenses discuss quarter?

Scott Lipesky

wage start for I'll with freight XXXX. and

talking a Columbus. been from perspective a in in we've this theme, stores perspective, we're a competitive wage in our So seen throughout we've and inflation very From in our as consistent centers, distribution mainly about a minimum here wage also XXXX. market then

lot a January From as tried U.S. was so market in we different the, to been see a go that the I guess, freight we interesting couple and of there. into perspective, angles into that XXXX. Ocean pretty the that to beat a It's So continue have. for deadline, QX an deadline deadline, of people out from freights congested it we'll the X previous have inflation here tariff perspective, as

XXXX, an into it's move we As unknown.

and some so continued seen inflation that. expense outlook. expense and We've the into DTC able and inflation. side, shipping of Also, expect our part freight We our we're to with leveraged in XXXX, can. shipping best manage baked as we've we there, through to been business that handling handling as actually that's We our see from pleased

to year. the full Moving on

the up our theme. initiatives XXXX or -- that's in from and marketing, is investing so invest basis, some OpEx in we delivering. transformational a those an we're like also was for We'll are of We're our outlook both in full beyond absorb things XXXX, the year to because similar investing We'll inflation. of QX So business. what

we how getting Our smarter we getting marketing, are the Fran marketing, better smarter at mentioned, delivering we're and better and allocate as about our resources. and

XXXX little a It'll in a to investments results again, of both we So pace XXXX. investments still in is, we marketing we'll like with our leverage expect continue these the be more XXXX. both big and we And one -- transformation. see all to increase thing OpEx bit seeing from than to moderated we're finish like also. But from

Operator

go next We'll with Baird. to Mark Altschwager

Andrew North

the these the Altschwager. Mark then inventory you discuss for categories assortment? embed spring on of improve outlook actions correct to you've are feeling Abercrombie tops the some directly, North And Abercrombie more in How assortment as to the and relative quarter? does and Can positive comps there? women's dresses your about position Drew is you at This taken you fourth course

Fran Horowitz

Fran. it's Drew,

our So comp stabilized. the as put brand actually at Kristin had of been Global X we the the plus came of Brand we for year as mentioned XXXX. into She earlier, President. has a helm Abercrombie that We

excited playbook aggressively of we're the to her Hollister brand. A&F about So applying more

expectation to XX as the spring the been affect As countries as order is And The with on and year. agile positive categories in can forward. question very is each move they've supply we reflected own relative delivery world, through as We outlook. chain. relative what doing to to we far those our produce have around position that in we your in improvement in is everything the our QX A&F, move a see comps an

Operator

We'll The Tracker. to with next Marni go Shapiro Retail

Marni Shapiro

about on and particularly, the or of you some do And then Stores Can behind something look loyalty across initiatives programs on payment X us a Hollister's separate you've give Gilly? anything just behind in fantastic. and update really will the off? an the that for loyalty brands talked just you

Joanne Crevoiserat

that. on jump I'll Joanne. is it's Marni,

sit key data at engaging this Our year, loyalty member over big been and with customers program. asset point, better a Gilly And going are our still. plan customers customers. Hollister what's successful and us scratching what's a XX for customers. with and programs just you mentioned million important capabilities, we engage in loyalty our and program. growth personalize level, new there prepared At the and and in importantly We're Fran we a our don't customers our leverage as remarks, to for the her to through Those technology to engaging accounts continually to programs customers. as forward payment looking a we invest next, to understand communications Hicks separate with have mentioned out personalized our never on better surface very We're this our really have better our loyalty view the can intend opportunity and in more we a and that engaging engage

have And may those to and time lot the and globe, those U.S. getting capabilities different to we of close a what's important the they customers continue world, customers China. those Germany around important for in need value, than the tremendous across in that and on to to customers important to payment be customers loyalty. we not it's in we -- And look that offer. capability to capabilities customers what's to our capabilities your for of we a So our the spent stay and understanding vary and and we to continue close array

rolling we'll loyalty out rolled We China have Europe well. also recently across and this out programs as be year

of So well. we're stages in international our loyalty as programs early

Marni Shapiro

question ask could pay exciting. there. just I more one That's And

I'm Street shoppers your but of at you said same have decent The someone still just that that do see their might have a the they -- the California in neighbors business retailers or who trend? other of which people amount Some curious in done younger if target shock cash,

Joanne Crevoiserat

a say, base we -- base. business. of a have We cash customer It's decent have younger a do -- base would I

noncredit So option terms our our becoming cash do business that's younger but into added customers as apps, where of customers. we is decent we've Venmo particularly, our appealing in our the that Abercrombie and have to a to more fairly businesses, play, also customers comes

Operator

Kanaga Bank. Deutsche from Tiffany comes question last our And with

Tiffany Kanaga

significant can you're walk there, especially takes help the in Abercrombie to AUR? is guidance like the looks a quarter your promotional trend and so rate driving slightly declines mall, first you what margin better the of seeing lower higher out behind gross being still up contrast how us at through if peers, in environment for relatively puts despite a margin of inventory at expected anticipating stands some and still your some Your X%, a

Scott Lipesky

I can't comment on I Tiffany, which comment Sure, on our but can I will. us, competitors

through clearing A&F outlook. reflected So we leak women's as in dresses our to we that and of QX, look are into that's and yes, some QX, tops that'll still

to we our opportunities feel that I make reinvest mean, some and a that Abercrombie. we're the outperformance is QX, we've balance from promotional like see cost continue AUR. we'll QX, in and We remain competitive of lever to we'll sure to in going We calendar in competitive. perspective in seen Hollister

here sit feel with we outlook, for we up confident today again, in QX. flat So as our that slightly to

Joanne Crevoiserat

And well environment of are as data you support Tiffany, Hollister, through QX of saw year, still margin did line point positioned were to some in competitive highly that make quarter. in and I to gross at up inventories higher gross leverage quarter, and we our in a -- the competitive can with manage quarter X%, in margins. think, -- we the the are with most first the arguably at use into sure our and We fact a offset grow we ability Abercrombie which the our outlook fourth beginning investments we quarter the coming and to is AUR

inventories about to first about and margins good manage feel -- line positioned we margin our are how the So our ability the quarter. through

Pamela Quintiliano

for That'll end our questions today.

Fran Horowitz

Thank you.

expense operating I playbook XXXX profit gross leverage are performance in on forward for a as to interest and We growth, XXXX. continued our thank rate deliver progresses, our your have the place to and and and pleased support. with you top line year you updating look expansion in

Operator

you And this we call, conclude does thank your participation. for and you. Thank today's

disconnect. may now You

Abercrombie & Fitch (ANF) 6 Mar 192018 Q4 Earnings call transcript