ANF - Earnings call transcript Q3 2019 | Abercrombie & Fitch Co.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, please standby. Good day and welcome to the Abercrombie & Fitch Third Quarter Fiscal Year 2019 Earnings Call. Today's conference is being recorded. [Operator Instructions] And now at this time, I would like to turn the conference over to Pam Quintiliano. Please go ahead.

Pam Quintiliano

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

are today Chief Chief on me Fran Financial the Lipesky, Joining Scott call Horowitz, and Executive Officer. Officer;

is third this the under presentation. Also website earnings Earlier issued our section. our our on an we release, at morning, Investors which is available available corporate.abercrombie.com on website quarter investor

actual the company's and the cause A uncertainties XXXX. we provisions could detailed on These Reform results and today. subject Commission. in contained to are filings keep that mind to in with call Litigation subject are differ from that mention factors Please statement Securities is expectations Safe forward-looking any the of Harbor materially discussion to the Act Securities uncertainties these of Private forward-looking of Exchange assumptions statements made and and the the risks

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

non-GAAP the Additional to GAAP details are adjusted this morning. measures the earlier in reconciliation and issued financial included of release

will I that, Fran. the to With article over

Fran Horowitz

Thanks, our positive Pam. quarter we consecutive and of thank QX, ninth us joining comp. of In results. our for delivered to our you discuss consecutive currency today revenue third quarter quarter constant growth Good US third morning, and

strong the and ongoing Back-to-School disruptions solid in results driven weather September during retail warm were patterns by Our by environment, in quarter partially challenging international August end and offset season October; a of in including markets. unseasonably key

holiday October season. we've in us performance ahead, and November the we As International the US selling experienced give in early look confidence for the and

larger while a international on Hollister came comp. minus By was impact international Hollister year. a a seen X% a international brand, Abercrombie By US Abercrombie to flat the third minus X%, deeper X%. and to comp results X%. posted total achieved at therefore, plus a the versus last For and the a penetration plus was X% plus quarter, relative geography, has in we a

comp X% trends. a at Performance by represented and compared traffic plus look mall in from of last territory. brands US ongoing to a all results, acceleration our X% X% growth plus year, and with our above average driven plus continued double-digit results in digital an a Taking was positive closer quarter second

offset this a Our last sequential X% decline comp compared and minus minus QX. by to represented internationally, year, minus was positive from X% X% in US a

in Our faced markets, including headwinds largest international continuing of uncertainty UK, negatively our market. is macro the the around our business escalating sales impact international number a to in Brexit which key

in ongoing Brexit, negatively Beyond protest results. Europe Asia and impacted also

intermittent quarter. continue closures be Kong store the Hong a to throughout with drag Specifically,

in continue for Additionally, through early have and that Europe opportunity heat accessories. in suffered extreme September, which to late Nevertheless, in whitespace have significant markets. key and we clothing and remaining the fundamental we long-term sales believe growth in August both Europe confidence and Asia soft hurt

Recently, capture tremendous investments we've opportunities. scale to international make begun to the strategic further our business and

properly in Over us begun six teams that for customer to them, that and hired the to allowed the get regions staff have relevant These trends Asia closer our to to invest and brands. specific our will better team. past months, Europe have market new help and international our we us are heads

in to for laying positive and expect of foundation We success fiscal realize new our and the the impact are beyond. teams future XXXX

improvements transaction average last plus QX. to driven positive last comps a year drag. With while customer where comp are In and in new International on specifically, to women's adults, fashion. specific and X% nicely conversion value, Turning from continue side product, reaction US distorted trended comps strong by flat Abercrombie, in versus plus to be posted the quarter, performance. we to a a brand we up At X%

in September more to us remained warm. nature, which with is the benefited lightweight transitional starting in women's and weather The when

in collection gains highlight, comp well Curve double-digit and Love had including we by introduced as were outerwear. driven jeans women's several a recently knits, quarter, categories as Straight Within the key the dresses Mom bottoms, bottoms, For Ankle style. and

fashion jeans, remains bottoms midi popular. skirts Beyond soft and

experienced and its we offset selling by our than positive led strength This of bottoms which the was Fierce, quarter -- heavier partially to jogger pant. shorts jeans, comps. quarter third results contributed Abercrombie's sneaker outerwear, of was country the women. one Men's, by In in fragrances consecutive weight top men's posting also third

success the to campaign. AF addition our also Soft Curve marketing -- the In be evolve and team Love continue Fierce jeans campaign, to successfully

the built multi-day brand build to our Hours immersive educate hotel were continue of to marketing we campaign. response the that event In in building moment, made and recent and brand. Abercrombie at Hoxton LA the target this customer our XX We our positive Earlier pleased pop-up off changes muscle. hosted to which product an We with this we've month, Do

the event at hotel December next Our be in will Brooklyn. Hudson held in Williamsburg,

and While we positive girls contributing about to kids, boys we adults comps. are excited thrilled with with are performance, equally

nine weakness Asia. space experiences significant believe market kids high comps came Hollister, X% At quarter, quality new Plaza. We cloths with Garden the and results growth meaningful State continue white We the the there're US in in vehicle. minus in to opened new fashionable the children's Europe and playful for positive offset and in kids by at including

August, start In the launch the season; parse burnout of solid Taking of our girls story US, to a well curvy Back-to-School from benefited had out collection. moment a from the as US strong international. growth in we product jeans the the sell-through as we to

did warm remained depth up have wear keep September, weather As in not demand. to now enough we in with

to weather tough suffered conversion a sales traffic to a in colder as and period. rely As had assortments transitional drive result, we our

October, than turning Internationally, well in weather responded we this the our through improved weather was the we to customer more cold traffic. product. but and offset move decline seasonal, a As conversion, by saw more

situation, control hard macro success and we invest working position digital we for to long-term to While by cannot stores, are Hollister the unpredictable continuing in talent.

weakness and comp jean strength bottoms we another in curvy not both genders. across offset in popular fits, record have acceptance across delivered was bottoms, jean girls the Unfortunately, pants We skirts enough broad-based and mom new as outerwear to performance. did our by quarter. our in product genders. maximize we styles tops, saw girls, Within jeans onto and such Moving inventory in demand,

In responding we girls the the we customer delivery. well top, to with improvement made QX from adjustments sequential realized for Back-to-School

to While more and improved do this as has recently, performance is seasonal, quarter are we deep enough warmer expected comp highly and our a key conditions. top than not quickly missing challenging has heavier key More weather dramatically. was encouraging, weight particularly opportunity. our decline with not sales, buys Outerwear turned this sell-through aligned the contributor weather offerings our was as line

and remains well The healthy be Hollister brand to positioned. continues

As in reflect areas associated we to action and identified for our performance, results. drive improvement we've plan

breadth core while and architecture top items risk. we and in refining by Specifically, product assortment a to key increase proper region. These seasonal disciplines mix are have our to our investments appropriately us of will skew help managing

are we realize We quarter. the initiatives to that will optimistic these begin benefits from this

Hicks. Gilly to Shifting

meaningful test growth is of and We customer and We continue lounge intimates targeting Gilly we and for this to various all Hollister's well resources growth available to our see signing globally vehicle. continuing with comp important to currently in are in options. double-digit offerings. our footprint devoting are believe

We pleased and six During our carve-out during side-by-side. quarter. marketing Hollister opened with the one the were quarter we

a and and across in confidence meaningful the unique is building driving us record Our helping focus engagement with leading brand with purpose on level. teens more connect authentically

in the Jeans drive help Our denim for performance Collective the the records in US, Good our campaign to quarter.

the XXX,XXX of We Good. close the million for also to power The campaign focused for our Collective participating. positive campaign teams XXXX on with had and XX and anti-bullying partnered DoSomething.org roughly Cancel Bullying words impressions

series recommendation beat and program partnership resulted program monthly April. purchase viewers and XX AwesomenessTV all Instagram benchmarks roughly in had and and views across lift has year-over-year. million double-digit Our intent in YouTube performance The since channel

likely of Our driving High their participate Tour the School us to sales that before to XX% than with Music program is shop came and with Nation school. jeans traffic more also

to we focused transformation on to term, While remain initiatives. the continue our execute near we

increasingly network to than derived discuss Roughly of need possible. now ever, will the I world, store stores are and more optimization. global And shopping matter. provide experience best it's XX% we in our omnichannel absolute revenues First, store

have and an test that ongoing us up temp for our store We and leases our to remain in our methodical our invest bankruptcies over renewal fleet controlled square roughly XX% We store with US next, enables year and shorter-term priority. recent of locations our Refining we continue size selling and footage. to approach. open is to base will leveraged to this base. With retail adjust new we and store lease stores flexibility maintain

We be conversations constant with store in and refresh partnership and our are modernize have aggressively strong our landlords experiences. to

nine quarter, third XX Abercrombie our delivered experiences, total year-to-date six In and XX. Hollister's, we including to the XX kids, bringing adults new

Westfield, experiences in combined in new adults latest deliver shopping the London, A&F including destination largest kids We and fourth are to our continuing in the a quarter, Europe.

pleased the must locations economics. right remain XX% have and the we with footage geographies XX% gross retrofitting the stores digits. of footage the XX%. of are of brands, XX% and For we've Abercrombie are anywhere cutting formats. kids while right prototypes their and down been across with third right square co-tenants Hollister's, opening, We quarter to it brands the productivity as adults end Hollister, square we XX% Abercrombie, our more new existing all right mid-single our in At updated complicated is footage by year with and should square the in of from roughly With

our As ahead opening very stores. holiday season, been new of previously mentioned, peak we've busy

XXth we've Abercrombie adults Garden State Hollister our store to New experiences Street opened Plaza City. In Westfield, London, York and location in addition in new kids also and

took and fleet. up opportunity of the of is track be this our on initial area. with response on Hollister minimal locations in top and advantage we store XXth test we a lease got to to one quickly investment, results For brand our the in the Street, running And based performing shorter-term to

existing to Hollister will real that once with morning, decided instead is set relocating in today. Abercrombie Abercrombie that represents footprint Stay on Fifth Fitch mid-XXXX, current our our about we will better to just a lease. announcing expire estate, Fifth blocks we lease With store to experience our location City York space, size our asset flagship we long-term our Fifth retrofitted The an and our be another New half brand utilize few other Avenue the renewing provide Abercrombie & Avenue Avenue are downtown. Hollister this

we street. York Row of office closing store. New be By that location, brands closures Savile will to should City subsequent office more expanding growth London, but speak estate. brand The adult These real conversion the kids with adult retail team. This Fifth Savile former co-locating and feet. we productivity enhance reducing XX,XXX to we and space move by in location also across announced kids customers Abercrombie our from kids the on recently to into Avenue be converted on to both support Allowing modernizing will the square Moving our to to store European are our in our utilizing engage experiences. square flagship changes focus one effectively close footage our Row, the

been key of our checkout. Abercrombie transformation have make of active optimization, options loyalty China very we program partnership in rebranding Instagram continue initiative. we payment recent Tmall, stores include; A global progress other US, Though offering on and with and expanded our the of Klarna, store launch to our our in highlights program with loyalty introduction against the the network few the

As we our internationally. season, trends as encouraged across holiday US I brands improvements well by as am approach peak the recent

that global unexpected protests, this FX have a and will tariff we finish we headwinds XXXX note. been While optimistic year faced we on are including strong rate,

global ahead, are initiatives discussed enhanced growth. meaningful target. we accelerate along are optimization a impact, to fiscal omnichannel would fleet several with begin XXXX to more essential for These store Looking our have us to and our achieving help excited key strategy we which profitability

the discuss to quarter more that detail. in will With to turn call third I results Scott over

Scott Lipesky

$XXX results. came plus of reflecting currency a last quarter from $X X% in Thanks, last flat to basis, were year. against FX. approximately on million On and third our a million Cost flat constant an year Fran. to up Net X% impact sales adverse

geography, plus last with By over quarter X% global comp, challenging positive comps remained the a return X% a plus XXXX. X% comp brand This improved plus a to on achieved in were our and the comp QX while of each cross-channel a in Abercrombie Despite plus By plus compares with X% and to year, brand, in positive territory. quarter. X% respectively US, Hollister positive minus territory X%. top traffic environment, conversion we

Our international comps were minus to X% X% minus compared year. and last

shrink was rate profit of our points basis our year's XX.X% points. additional QX. losses impact rate reflected adversely previously year. decline, points. gross Our negligible accounted physical to we points points down points, was XX impacted basis XXX from which primarily in results on gross China our as the and outlook the remaining accounted down year-over-year was profit by QX. not results Constant-currency for for related of basis, had XX in store a basis inventories basis FX XX QX this basis AUC. to Increased XX in results, tariffs basis of XX last place of through expect flow The impact taking annual most higher an

million, XX deleverage. as $XXX as results compared the cover operating operating I'll last income last basis, related on million, legal of income million store of approximately contributing certain million sales operating $X expense to benefits pre-tax excluding asset other Other which points of was basis to rest percentage Adjusted charges pre-tax year. this of of year. flat adjusted flagship $X our an a declined impairment excludes non-GAAP year and $XX matters

to $XX compared year included $X operating was XX impact Adjusted adverse and million million from last FX. income million, a

the mentioned $X.XX, effective or Excluding on Adjusted per for quarter basis. was adjusted basis net tax share income per to diluted margin XX rate operating compared last $X.XX items the net constant-currency declined share or adjusted certain XXX points earlier, income year, approximately The basis. a XX%. $X.XX adjusted a points constant-currency of was diluted on basis

inventories with X% to single-digit year, We quarter in outlook. total ended line approximately up our with the last low-to-mid

to low-to-mid and end focused inventories expect digits single on we with ahead, Looking QX inventory up controls. tight remain

quarter strong. $XXX equivalents and with Our We cash of balance sheet the million. remains ended cash

weeks approximately board roughly $X share. of shares X.X dividend authorizations. for existing Fiscal XXX,XXX under million year-to-date, and repurchased per $XXX through shares dividends. returned share repurchases directors we million During Two our we a have declared ago, have of shareholders $X.XX the currently quarter, to remaining our quarterly million and cash

repayment gross last company's the of In debt of compared decreasing million the $XXX million loan borrowings during quarter, as under to a outstanding voluntary addition, to million, we made amount the term $XX $XXX year.

outlook Before the into the In imported low quick in and XX% merchandise our to were US China teens be turning China from expect fiscal tariffs. finish at on roughly of XXXX, XX% update XXXX. to we to a fiscal and XXXX in receipts

incredibly our long-term helpful production to migrating sacrificing partners. offset to grateful very or are We while been in tariffs and vendor not They have quality helping speed.

in due our cost roughly goods to gross and $X that $X million the impact negative year, Our the and we for sold outlook have List assumes and will million of for to List X profit China fourth quarter full X tariffs.

holiday As response a tariffs. reminder, we did not raise in ticket season this to the

the quarter. full Now onto for fourth our year and outlook the

million year X% outlook million. of X% flat year-to-date results. adverse X%. last we For prior to driven by outlook $XX sales This to plus to from our X%, approximately reflected and $XX and to compares by up of to of up fiscal XXXX, X%, up contribution, of approximately in an new flat up partially impact adverse our expect net Comparable of store to and comparable to million, be net sales impact which flat been FX offset FX now $XX sales against has be flat an prior

of to the XXXX expense X% Gross to XXX XXXX despite points prior points. be down profit an compares a impairment XX changes million of X% XX exit quarter charges excluding billion, be reflecting outlook third mid-XXs. charges our $XX anticipated full Capital remains adverse basis increase of $XX This as quarter the of non-GAAP operating tariffs. reflecting down from rate to expense adjusted basis to from XX.X%, other impairment charges for prior the the expense in to of tax X% up approximately in store investments our income to impact line This in fiscal management. flagship million. FX second X%, $XXX fiscal and XX quarter, the continued same outlook points China a asset and Operating tight of reflecting the approximately our of outlook incremental rates rate million, year combined recognized with operating of basis rate from prior and in $X.XX

an China XX.X%, from operating combined $XXX tax an XXXX our profit and expense $X in and adjusted expenses Regarding be the of of up rate XX to million reflecting to mid- Operating approximately rate XXX fiscal the down impact sales FX last up of be a outlook from plus FX income to tariffs flat X% X% year. to XXXX as X%, compared points impact assumes upper to X% to basis be fourth basis rate adverse non-GAAP flat points. be to of XXs. reflecting against sales adverse other the quarter Comparable fiscal operating Gross flat effective to to excluding up million. approximately net

With questions. for ready are that, we

Operator

We will begin Instructions] Lejuez Citi with with Research. [Operator Paul

Kelly Crago

for taking guys, this Hi Paul, our thanks is question. Kelly on for

Just also more And by US. margin trends the have that the around -- are question you fourth just Did on you're some so what and color promotional third the competitors doing provide if seeing US, Hollister? the some positive your in the quarter drive in merchandise in concept on in promotional you both environment, give you quarter. the at commentary comp could the get to what to far

Scott Lipesky

Scott, about. promotional a trends me the summer would merchandise bit products of quarter. brand. coming say, that grab Hollister had by bit a than We was Abercrombie that it's little Kelly more little we in talked I through let

FX. we some a total, In in is when clear were So flat AUR using about was exclude to through our markdowns company quarter. that the you

brands in were of outside say of the pressure I'd that line across that little So bit Hollister. relatively promotions in markdown

Fran Horowitz

the need with be. prepared goal is but out the are to certainly fourth promotional year. the go we compete, of said, promotional, that the the quarter less of for there With Kelly most quarter Yes, time environment into always we being

well so balanced good are that our and shape Our in they're we can make are we brands in X%, across genders, inventories very pointed at sure really promotion. plus

Kelly Crago

had positive trend Got around little thanks. more I so international just, think like it it, far And commentary quarter. -- fourth then a some you bit sounded in

So both weakness how and should the we I had quarter for international business, we've while. some term sustained be longer just over thinking in fourth guess a the about given there

Fran Horowitz

We've in Brexit, Yes, is going headed complicated trends better there. quarter, we are the third we lot out see teams lot quarter Kong, on ago, to about our Europe. did a EMEA controlling excited team. we in we In was that activity international. throughout several into certainly for increased heading talked seeing ground, teams. to fourth between of can. But script couple building we fact, the on team out on. international There have to in focused London, what running lately a and that new a the with Shanghai weeks meeting London those some in I It's region our Hong as in We're meet are did just we mention protests the our a few weeks I'm

So off to ground, into lots we and on closer head we as 'XX. us really pay of to helping good the that customer, expect talent to get our

Scott Lipesky

still mentioned, talent just we in on we continue we're investing that We're that. in business and investing the the will do Fran Yes, and business. in investing digital longer to term, believe international in we're stores

Kelly Crago

Thank you, very much.

Operator

ISI. Rochette Westcott with from hear We'll Evercore

Westcott Rochette

target XXXX, your full out Hi, you a still Thinking guys, for lot. there margin year. the thanks about have

opportunities of year update X.X% kind still where you do year step hit the kind could that seem the that you will there, get from in you think improvement You I holiday the give big buckets, next biggest want an target? be before confident, you to to of to this know but through

Fran Horowitz

targets. part the And the on Westcott. Hey, biggest achieving we those are we year. focused entering of just are Yes,

still learn. we to So a have lot

estate our on review embark to and about all our budget are annual real landlords. process with of We our

to add focused targets. are our want to on we still Scott, So that? anymore

Scott Lipesky

to big Yes, buckets out it last we getting back really in laid is the year that April.

our in sales gross for walking So midst margin, we're this some top of the on leverage huge OpEx and process week. line budget then growth, year. the acceleration of into that the We're here top volume

year. the set out So landlord structure on lot side a that negotiations to expense from really up ongoing figure we have our learn lot to our a expense next from and

So lot New the more in we Year. as talk to a come

Westcott Rochette

All right. Thank you, very much.

Operator

Fitzsimons will Kate we Capital hear RBC Now, from Markets. with

Unidentified Analyst

Can your you Can just Hi, some Kong. UK, little Shiyao the more actually good to spill taking headwinds morning. dig out that Hong international for negative XQ give deeper how comps is outlook. comp color? color We each our more for of those question. This on in know included in into pieces Thanks X%. overall is for then of expectation and into and little Europe you the give international a about the want a I called the you that what Kate.

Scott Lipesky

one this kick if Fran add off I'll and in can like. she'd

and it the there a the customers' with So Brexit, out into it's people QX, hard came UK. as mindsets, really bit the for we Brexit on got the in the into starting date ground was there paralyzing for XX/XX,

are little in saw where we UK the Abercrombie, penetrated we've outsized we some our some recent, seeing of the local Abercrombie, opened news a a in So impacted while. our so stores and Hollister Hollister more France have other our in is business. for protests into the of just some lot these in in had Spain. seen creep cities in UK and that has for a those impact. than we really Spain more countries a that have is for fourth protests been an where plus penetrated more XX customer little happened But I'd say also Europe. -- key

international weather a on business. the little So of that, top warm in was

did Hollister, really The that the end terms bit. a our things see maybe that little So a turn more kind of we key down this little thing bit of on the seasonal creep is of activity, good into a dive business and with got in quarter, we as saw countries. at

going the fourth optimistic quarter. we're into So

trend about I has that think been about managing outpacing today QX, the change international. total. don't baked I outlook, and what's As go been US into we're why mean all we think business as the that we would reason see QX the the but we has into a our

we're across brands. what the drive total to that's doing to try the so And

Unidentified Analyst

Thank much. you very

Operator

Jefferies. next Janine with The Stichter from come will question

Janine Stichter

taking you bit Thanks the it Can to more morning. like, doing It Good you for about sounds talk about to helpful. for a during Hollister. managing at little what Want was weather so there the was Abercrombie making there? mitigated at but flows. inventory the challenging little the a to bit questions. ask quarter, more my at everyone a than bit impact was changes you. alluded just a think way structural little would some Thank very color differently you're I slow And Hollister, bit inventory be you're

Fran Horowitz

Janine, yes.

items So is adjustments see team key made are What mentioned that third I'm where a coming out It's our began pleased the our bit of little confident the to fourth a the brands on we less I would fourth probably adjustments, heading for focused on and assortment between those we quarter that chase as inventory, architecture. little quarter to focused well our with for make balanced little has bit and about inventory in well during the Hollister. starting heading selling that a those quarter that noticed and quarter. second say I we script We the into in the into are and initial got more as bit genders. Hollister's, the

fashion. in And investment had A&F and different. more little bit women's in much now, a yes, wear particularly of A&F, was A&F an

strong a the for saw we So third A&F quarter. women's in performance

Janine Stichter

And Great, bit to want a ask just thank I about you. little tariffs.

next increases? absorb consumer thoughts think price for Any about into the these You tariffs, additional prices to this raising year year. appetite mentioned the not

Scott Lipesky

can clearly amazing that on XX% eyes out trying keep did vendors, team to is new an our getting as pleased we're We Continuing -- we did we XXXX. day there tariffs, to headline sourcing but control. our our of what us track, a coming job, controlling are to every were

expectations and for XXXX migrate the to is out. to to that opportunities low teens, other down look to Our bring continue we'll for

of we promotional where future. So more at sure the But that's that's clarity business continue promotions and We'll will go-forward. have to this come pull near point, as we'll the season. are in the at spring opportunity work every we as our I'm we and on is go there to necessary. to keep we that, tickets tariffs. on what that the eyes on through continue on really are quarter start back work we And much

Janine Stichter

Great, thank you.

Operator

We Bank. from now Tiffany hear Kanaga with Deutsche will

Tiffany Kanaga

you stores our thanks And Would remodeled Hi, those for and profitability lines, can performance most versus expect remodels be recently how taking the Along to brand? by stores remodeled the of comp year? acceleration the have also us able older of questions. next the a Abercrombie update performed? on we the ones meaningful

Scott Lipesky

Tiffany, one it's Scott. I'll off. kick this

the and over -- performance on brand. Hollister, So break journey We've return high-single we years. released in in our early On journey stores I'll in What been is has digit of year. been by store The a size store. Haven't in the there the the our we here apart a big about consistent reduction Abercrombie, very over each through those very on the the the the remodel we're formats. of it Hollister, years. or been consistent. a and still Abercrombie have new in stores this started have change vintage remains back XX% on very that's sales results vocal as the how XXXX seen of the flowed the seen remodeled the to we've four-wall of over XX%

productivity So these seeing we're we are with very in pleased improvements the that stores.

Fran Horowitz

it negotiating all throes regarding and of comes we are Yes, down committed we're to our Scott these A&F as we really negotiations. the the size balance of remodels, sheet a very landlord just XXXX, the have strong mentioned to stores. in of earlier, Obviously, just

our Our XX%. reduce remodels to for goal to XX% is our and A&F square footage from anywhere

The to Hollister. of square a a had journey footage. appropriately bit of of negotiation different Hollister's a just the sized and than we were Most the to reduce it's it's So having A&F bit a redo different more them.

come finished that to negotiations, we come for in as to these more that -- 'XX. So more in

Tiffany Kanaga

All you. right, thank

Operator

move will We [Operator with FBR. Anderson to now Riley, B Susan Instructions]

Susan Anderson

if and be fourth you good some but for see the like thoughts thanks Hi, your improvement Hollister. question. performance I and make, Maybe morning taking weakness did tops could touch changes you around quarter some the Thanks. It still my on continue there. at there. wanted you sequentially sounds may about to talk to

Fran Horowitz

Sure.

the specifically, well Hollister, and So positioned. brand is healthy

Coming iconic We the on the some are opportunities. third have team and we of certainly really some out categories. did brand quarter key global and in second the quarter

opportunity did the we sold we them team third candidly, from building their well As as balancing on QX they're buy some renewed items out of is really deep our the and a building not them assortment what again key focused on have items. architecture, into but they just their on through key focus as our QX, I enough call corrected chase the quarter, in focused and opportunities would

those corrections made quarter. corrections the were those fourth third in were of some quarter, in made more So of

we the year. We are confident the in head time busiest our product as into of

Susan Anderson

Great, And in then like feel continued. do follow-up. I in maybe you one like and the October from fourth thank US? guess you could international November sounds could I you. have both see strength It sequential also some if has improvement for quarter, the then

Scott Lipesky

when into say That the is I always that. quarter, walk the would definitely we goal

our we confidence the is point, the get that's into this week, at next like more to started categories what the us ahead head out as us to peak we into back At confident the the weather also US starting today and key quarter in saw internationally. in the October, and more at if half the closer like some what outerwear So volume of of seasonal, fleece, second win sweaters, gives of are we turn of and must end got with Christmas. we as especially When QX. all

So there. we're compete to ready out

Susan Anderson

Great, much. this thanks Good so luck holiday.

Scott Lipesky

you. Thank

Operator

to move Marni The Retail Shapiro now We'll Tracker. with

Marni Shapiro

you international seeing significantly traffic The but moment. just more online is you're the talk down little down congratulations. traction is a really about curious assortments or Hey, online? guys, in a bit and I'm in stores, stores Could it fantastic. for look good still

Scott Lipesky

The traffic it for positive quarter-over-quarter or with cross-channel traffic but weren't make drop in AUR. to remained we up that down, able was a conversion basis, on

on working and remaining made what still more we'll as in comments we but Fran obviously, an positive, some So on QX, I'd the brands which back that's say across in have to of opportunity space, gets while as international channels. we all the in drive well believe drive better traffic as be the to brands, to conversion continuing the

Marni Shapiro

are use people are people the you BOPIS? using are seeing you you BOPIS? seeing are good in on conversion finding that -- And US, And

Fran Horowitz

Yes.

what purchase store. pick continued in those customer -- it, attachment it we're purchases. know up POPinS with our call Yes, as or purchase You -- in on the seeing performance goes POPinS along that POPinS strong call online, rate as we we well

Marni Shapiro

guys. Thanks for fantastic. luck holidays. Best That's of the the

Operator

America David have question. Buckley will of with And next the Bank

David Buckley

for Good our morning, taking thanks questions.

updated format well? internationally. percentage stores questions of specifically What in versus few What the underperforming US? your as the Just category international are are

Fran Horowitz

turned, of middle with weather kick I'll very the weather the in category trend strong underperform the that shift warm situation we similar to The the trends when international we out internationally was a most US. saw with internationally outerwear, same that and in that nice internationally the with And experienced the for both would reaction again and quarter. both a domestically So, again, US, in on category. and it outerwear

Scott Lipesky

where over Europe, these specifically things. versus is the Hollister, XX% behind for of format formats US US. We're updated XX%. we in for the new where are the we where majority have in and we're under in instance, the The On large

getting the to our our we're where we're XXXX happened cycle going of majority in of So kind of up back to that XXXX. openings on to come the point

forward a two. So year those we're we lease next coming as or up over roll of the on couple lives

in Europe. the of put we'll put where new that's to largest So, in malls one just formats London, the We take Westfield, a new in place. opportunity format

Gilly. side-by-side a have We

going renewal, come are leases up after prototype. be we the these new to as So for getting

David Buckley

in is international to come business? And expected merchandise from pressure of fourth Thanks. the quarter are the the margin the majority

Scott Lipesky

promotional promotional happening the would what's getting most is also the the in is US, I'd say, but world. we it's quarter it see broadly I globally. more all this say around

You start more to drive have in to Black China you Friday has XX/XX, from the that so more year. Far And business. East, then creep into there really and then Europe starting promotions each big are some into XX/XX

promotion. getting more little of the So that to customer locally a accustomed some is

it's one world. coming around place say wouldn't from the I So

David Buckley

All thank right, you.

Operator

[ph] Moving on Konik Baird. to Connor with

Unidentified Analyst

it's Can making progress This talked you're opening you last offices controlling is business the anything talk quarter there? my of question. centrally else for I initial the on know you read about guys internationally. to for early, and Mark, just Connor thanks and taking about takeaway instead but regional

Fran Horowitz

building earlier and locations. talking out have mentioned established been Shanghai about we those these as so I Yes, have London offices. that we

of just innings. meeting was them, London weeks hired talent, few early We ago. recently lot just in a are in of We've a the I many

Our expectation is that as that we of we will see the benefits 'XX. head into

As to in there that meet few well as weeks our I'm hitting team. Shanghai office, a

we expect I So head 'XX. we've from that into But as would made see to progress hiring results in talent.

Scott Lipesky

more a the around why. Yes, little

calendar our the customer, we're the the have that for the about to execute of We to local to going huge us. get localize the ground better products, years things now the It's have lot team we've cadence. and opportunities localize The marketing. to over opportunity set on of of floor a closer a talked the better

So we couldn't more move as be excited into XXXX.

Unidentified Analyst

the of holiday Best season. luck Awesome. for

Scott Lipesky

Thanks.

Operator

please. Rochette We Westcott Evercore. have a Go from follow-up with ahead,

Westcott Rochette

wanted guys. lot on a Thanks margin to your dig in just I gross guidance.

part from knowing anticipated, the Thank holiday it planned a China I peers kind any the we've shrink that's had the given will and out. that anticipated you that you ago? months that for secondly, promotional you play of than is kind look the this And of FX, that of margin margin? fourth on the as at different a gross environment quarter assume you of balance than overall gave heard First you. quarter over called in gross a you you guidance some the and that your year, catch-up six

Scott Lipesky

Okay.

with the start me shrink. Let

year to take just to little that need have went a up for our You ticked this we rates we bit that cycle through we shrink so QX, they here as saw in There'll the be. QX, was are correct we our the needed rates physical a adjustment reserves forward. catch-up have adjust go in get impact QX in tiny to be our as where inventory

six the FX XXX our margin to promotional would quarter I that for points QX of real basis gross tariffs. year XX the of is and change. QX as throughout most due down outlook we about no in performance months is This say, ago, think versus Our basis points, around

compete. points want to give The is We environment. other the ourselves to XX due potentially ability promotional a more to basis

is the place right quarter. inventory into coming in Our the

if but a inventory we're to, not So compete high balance. into that need to we have pushed we through the ability

reasonable is of So we us margin based on feel in and like realistic front what's today. the outlook

Westcott Rochette

guys. Thanks again, and holiday luck for good the

Fran Horowitz

Thank you.

Operator

ladies this remarks. gentlemen, And to over Horowitz call turn closing Fran back will and conclude your I'll question-and-answer session. for the

Fran Horowitz

everyone healthy Thank the I'd like and all everyone for to global hard holiday. work. us to happy who you today call team of joined you thank our and your wish on

Operator

ladies We gentlemen, conclude you that your today. thank now you may this With And and will disconnect. for for conference do participation. your

Abercrombie & Fitch (ANF) 26 Nov 192019 Q3 Earnings call transcript