ANF - Earnings call transcript Q4 2020 | Abercrombie & Fitch Co.

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Operator

Good day, everyone, and welcome to the Abercrombie & Fitch Fourth Quarter Year-End Fiscal Year 2020 Earnings Call. Today's conference is being recorded. [Operator Instructions] At this time, I'd like to turn the call over to Ms. Pam Quintiliano. Please go ahead, ma'am.

Pam Quintiliano

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

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

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

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

Fran Horowitz

Good you, morning, earnings your everyone, ones quarter and safe hope welcome healthy. and to families I loved call. our fourth are and your

stronger, and of we and to the gross smarter ever I confidently liquidity. XX% profit I Despite XXXX, of from or year to last the of grew and our rate million with removed before. XX% proud than gross faster on XX% am that operating the penetration points fortified balance our sheet billion global our difficult square end year, closer customers say drove. base, back environment, change from Looking Today, can revenue accomplishments to we our our digital $X.X are and positive feet by XXX expand X.X we basis

strength financial enter product offense. execution on Importantly, the brand has and XXXX to enabled our positioning, us

to unprecedented thank home as and level I Before rather fourth journey their with. group results, other would to with and store, turning well no global this quarter partners associates this on, our take is moment -- as for I our of creativity be distribution a There resiliency. center want on to office

Now fourth onto quarter. the

Our exceeded which X%. our $XXX revenues expectations. of the to million is sales. were upwardly end in to reflected internal or finish solid results Results revised January and provided grew plan our X% XX% Total a declined company the high for X% quarter. digital, XX% by This of decline, a driven to at

respond stores, consecutive to experience and XX% by and period messaging. Black We the to continued and capacity customers Across channels, reduced our of compared restrictions. We global-based hours continue digital across XX% to the U.K.. sales our realize strength in significant X our years. highest quarter margin was ever We weakness digital rate best opened, ended the traffic and to EMEA in website delivered offset and end product we open Among open This with gross the in to our QX. including at quarterly year-over-year stores. inventories Digital improvements lockdowns, our largest app driven as our promotional of the multiple reentered peak. on-trend countries realized ongoing into lower for by international market, Christmas and lean the Friday including higher third and year-over-year over intensity, AUR quarter products, newness

performance, factories gross We across especially continued expansion of XXX profit a with quarter ending close network. on light as continue fourth chain X% and rate points. pleased Overall, These inventories in factors all the transportation by contributed possible, utilize as we to of our stores, disruptions revenue down decline. supply with basis to were X% agile our very quarter

our before. to all than to Listening I season aligned voice ever that uniquely been product more holiday edit our are our was am proud navigated. paramount have we clearly X experience Today, the customer success. and points, brands defined challenging, While has

have Our XX%. in we channel customers to responding, our that new up file year-over-year. and dramatic estimate over Reflecting the existing with new grew value been customers average digital growth, transaction

to brand Turning performance.

with continue its We expansion. than Hollister other quarter in lower and of penetration. results Hollister, average including is Despite in EMEA XXX are digital value. to surveys, realized these challenges, by more which improvements brands global transaction be store This pleased challenges. Hollister double-digit of another achieved offset locations ongoing over our given digital impacted larger

Our gross promotions our us on to architecture, focus rate. XX allowing expand to off, high-margin must-haves and assortment on our profit and pay back pull top items continue

match top guy to and had sweatpants. growth our double-digit growth we sweatshirt with our For top. to At and offerings, in more well responded and loungewear and another standouts, girls, than well updated fleece Hicks, of also sales quarter digital strength impressive responded year-over-year. bottoms knit soft Gilly tops, including and bottoms XXX% cozy Customers cozy were assortments,

as Gilly and sales. our to shared last with our across in-house assistance guides, dedicated social and growth integrated including additional important Dixie Our partnership to fourth the D’Amelio, productive stars, continued own have we gift drove we also quarter, we active media continued Go, resonate, Throughout which resources marketing global collection, incremental this campaign, their quarter, vehicle. Charli

launched which Charli's sold X co-created buzz online, offered new quickly book out. generated also new We and and products

social we and the impressions alone, million in posts During third Dixie's XX a XXX fourth had resulted Hollister collaboration. over Post for Charli views. and quarter holiday,

our to results ongoing audience We and yielded a have bring which with quantifiable new relationship, positive Hollister. thrilled are

Adults, to we are achieved [indiscernible]. new leading volumes record benefited to sales ways from X/X several to promotions, growth we our At millennial, growth, of where over caters Looking find at our ahead, reduced we Results our Charli digital with expand to young relationships A&F Dixie. categories. excited and which

our new set sequential sales. continue constantly each In addition, with also push boundaries as experienced we and team improvement store Women's to trends delivery. outperform in

Hour the well interest our resonate cozy both in to elevated fleece traction increased Capitalized we content. digital and Kids, faux our categories with improvements sweaters, XX introduced for and growth our we outerwear last look fabrics, to the responding franchises. collections ahead on Across colored While way, fashion as led continue and customers SoftAF sales and gain registered the genders, both over build knits, we to year, SoftAF and like At the jeans and sherpa, soft fur. collection on experienced opportunity double-digit Abercrombie holiday. trend, continued with

We collection, in family, vanities. featuring whole family sweatshirts also outfits introduced Abercrombie and for the matching including

on a to contributor industry positive continuing our quarter. selling, social into doubled to and we with our A&F, an family, marketing. establishing down as purpose and Adults the on ourselves focused to Turning successfully expanding value. social to leader best-in-class selling At and Kids Abercrombie be which accelerated lean

LIKEtoKNOWit affiliate high-rise Our which of extremely and super proved be named Jeans XXXX our popular network the With vast to most the powerful. social across one influencer apps the A&F in skinny shopping in world. is app, Women's the #X

will Influencer QX pleased later In the purpose this month, values. Year A&F of to expand to also and LIKEtoKNOWit. the be first-ever receiving opportunity proved and announce that award the the Marketers rewardStyle to on team. Abercrombie's by fact, I'm Congrats

the color. Teen annual nation's by The Today, resource is health great and Following that emotional pop-up recent Hollister are mental devoted announced example health surrounding how the with with the we World of and and partnership closely specifically launch Mental the Project, Wellness justice Day Fund, social Equity fostering second National and Steve Abercrombie The by disrupt to our were Black a net History celebrating and partners a associates the to to we the teen mental their we This Fund members Group, young partnership our Allies to support, with are while Recently, our nonprofit associate Steve global the Dixie with Charli with Academy our high will event the at Hollister proceeds organization health. a that customer leading racial of in by In Calendar discussion. well-being Kid. group, Conscious of BIPOC which values. our Month and people we Day, offered surprising be of a initiatives, and the the brand's donated stigma are The schoolers collection, A&F the first-ever listening models and non-profit codesigned virtual mental living affiliates community created

environmental contract and that and will Recently, XXX% we also Tier as our sustainability begin including P.A.C.E. committed support management, third-party emissions to X provided Scope Cambodia, Ohio factory and D.C. longer-term executed life this renewable XXX% our Vietnam health total topics, trafficking reducing commitment corporate a our for our Cambodia confirms office X by the goal of XXXX and We've gas electricity we skills, goals. of in X advancements antihuman in variety greenhouse into remain training have many to third-party factories XXXX. also our program. made and workers our and to towards India, year social of Bangladesh and a and work We efforts on safety

with wash our products, As the Better our and with majority to eco relates of it partner Cotton jeans the to Initiative. adopted we continue

by excited progress, are there to much is recognize work We our do. that left but

We work all will confident we about. serve the as the could we to support future to create be communities we continue

introduced total top our store at initiatives. priority. the XXXX, feet and million social or and X Since company in removing XX% footage. a Global our also to on continues addition work focus be on corporate we've In hard responsibility, to been network transformation has across of productive gross we've square joined while underproductive our new proactively company roughly prototype square I brands, optimization

closure digital strategically refine penetration older, footprint, feet. XX% majority have of stores removing we We out preferred XX% gross or XX% XX our to store space. took square legacy or that locations in flagship XX% roughly approximately is included on and net fleet locations. reflecting XXXX XX% space square or customer the prototype XXX,XXX Hollister increased non-flagship expensive of stores in remain This stores, larger A&F gross In and to As feet The of feet to of fiscal of from base, our fiscal square close averaged on our A&F with mall more we million XXXX, sales X,XXX have and gross our closures our to gross of square closed feet. we digital than global XXXX. the X.X X,XXX XXX been the The Hollister. in indexes double of closed path XX XXX of or A&F over

We X A&F in this Dublin, additional our and the X QX also month. closed this ahead Ireland, on natural expiration lease call including X discussed for flagships,

omnichannel that location with experiences. of Aligning product evolve, leases business from changed. authentically omni on remain basis. find but our digital the our is find a legacy, we on-brand, rightsizing in while continues store XX% our us to the size, square evolution up the Hand with not of locations, our are forward a our This our the larger to platform important partners segmenting, the it by and With to and improve flexible, right we provide physical to have the footage move spaces for continue to look to initiatives. principles new ongoing XXXX, economics. flagships our mall-based with strength They purposely store digitally financial and optimization of refine lease with commitment resolute. our our on approach keep strategy or our clear. penetration X-year our a digital as to digital working maintain led as presence, renewal we terms most right us landscape, right while our that and store transformation And format be retail into digital a user-friendly spaces lever experience with base is profitability and customers hand global model. continuing to very disciplined with with have to landlord and led gives Reflecting As transform our our seamless we the ongoing customer to made and well relocating ability to want is They've the right journey needs rolling and as penetration, efficient. role to exciting

thoughtful growing continue plans in best-in-class capabilities to place customer to create to experiences in digital and profitability invest across and have We omni while enhancements channels.

Turning to initiatives. chain supply our

time speed across improve regarding to center leveraging but right demand price. we path to model digital and distribution we right continue data the fulfill at In the reposition flexed COVID our to the that As and elevated Coast on customer reshaped analytics and products utilize will drive right more including XXXX, we our we our capacity West as offer the and customers. not programs, positioning certainly more least, larger, marketing data, automated customers customer that Last, engage and spend. to are engagement, loyalty and a facility effective channels efficient will increase brand and to behaviors,

investments made and in We also building have senior our and talent, user analytics. including key data experience

see runway including pleased Before optimistic momentum where APAC, I to X all and and we brands, our head with over Building we first I'll global from are increasing we EMEA our as quarter are our significant on about XXXX. an long-term from turn results, and it impact Scott, domestically realizing are growing in into recent the teams. the opportunity start across regional we summarize growth mindset to

We are on the offense.

work in on focus operate lost continue As due uncertain control. towards we what recapturing to can we to sales we while we will COVID-XX, environments,

on improve domestic Specifically, and important and marketing our the sales we Gilly and technology be Hicks for and are work and other invest strategically focus growth; and on digital increase to experience; brands facility the and thought optimize to: accelerate resources CSR continue leaders. store in in footage our international expansion geographies; planning momentum global associates, store with opportunistic investments data to across customer partners

on more than right our in over turn and XXXX future for to are Following ever I to growth path surreal with profitable will deliver a that, it we excited I beyond. the Scott. XXXX, and that am confident And

Scott Lipesky

I'd our Fran's like their make the an work XXXX thanks teams even company and partners first for global reiterate future. to to A&F to for hard stronger in vendor help

year with Turning start results. QX to our thoughts and XXXX by XXXX. on finish and covering full I'll

X% net we sales of year. $X.X to QX, billion, last down For delivered

with expected, growth. levels, includes X% Hicks; were U.S.; while due worsened in declined APAC. by soft X% the was and in region, offset XX% this store year's Hollister, past, X% traffic in declined renewed transaction sales different in store for As Abercrombie, pattern net By QX EMEA which value consistent shallower. troughs lower digital declines and XX% the the In and with X% ongoing Gilly sales the which conversion region, Globally, and smallest than Net Kids. includes to was partially EMEA; lockdowns. sales year-over-year U.S., for traffic improvements average our of peaks and

in quarter region, of store the and specifically Looking APAC. levels. U.S. productivity year performance. productivity Fourth prior XX% store at global store XX% roughly reopened in and was XX% reopened By was EMEA

open As in X/X of were opened were the roughly EMEA. of U.S. in all APAC, yesterday, stores while stores and our

to We are APAC, EMEA growing and be teams product focused on messaging. our localizing impact and continue encouraged of in which our by on-the-ground both the

such our closer as New to continue very Lunar we offering APAC, customer, received. to As are our get Year we which in was assortments collection well region-specific

Moving on to gross profits.

last were driven basis higher promotions slightly XX.X% points to year. last Our year and was AUC. AUR, rate XXX of with up lower by Results below across brands

to inventory. Turning

COVID, mindset, having entered QX are inventories inventory X% with have We year. our is transformed will and Since comfortable management into down future. positioning, last current with something to we the which carry we onset our of the

compensation, of expenses on on in digital of increased With timely partially store executed network, sales. disruption delivering from general income, million to other continue offset asset now elevated in-store marketing occupancy, react this non-GAAP a basis by year, points. by related $X abatements will to of expense, operating rate and in are quarter which we I'll QX lower administrative basis. results rest million pretax principally Operating fulfillment COVID-related $X.XX. cover expenses rose dollar are primarily excluded we decreased the $XXX higher to a impacted million attributable the year driven the adversely across pivot impairment adversely $X.XX. by results shipping by shipping non-customer-facing and Marketing, basis, XXX COVID. to ensure results and transportation costs. our non-GAAP certain was impacted and by newness dollar expense pretax These partially flagships, $XX adjusted million recognition a and ongoing results increased excluding driven last an charges costs and offset Last deleveraged and controllable our of manner. we on asset and performance-based charges Excluded charges distribution store and Stores the on versus rate decline and basis including a payroll and $XXX by rent expense impairment

base rate progress $X.XX FX. $X.XX our on or Operating share last $XX As focused areas customer-facing last on a $X.XX on to basis. adjusted a effective made key million from Net in $XXX good to remain us per an million year million in benefit always, basis $XXX approximately fund currency year non-GAAP and compared putting constant XX%. diluted was managing The included expenses. in income XXXX, a cost was XXXX. We we position on income to tax was compared tightly

excluded Hollister Global were impacted with XX.X%, to XX% Abercrombie Turning By year. rate million The XXXX AUC. APAC. we attributable sales other year results Last declined related XX% AUR $X.XX. store in $X.X impairment grew from region, up year, growth. charges adversely $XX excluding of of in and was billion year, impacting annual versus the $XX Gross traffic or COVID. XX% and sales last by on declining was basis to revenues charges XX% last higher offset results. points fiscal in million full U.S., billion, charges excluded $X.XX. XXX volumes EMEA by to year income, last $X.X compared operating XXXX, XX% record adversely profit pretax impacted pretax relatively was and Operating approximately which below expense, These asset XX% to XX% $X.X digital impairment partially $X.X to of asset principally flat results year. to net sales was declining flagships, XX% billion billion down a Net XX%. and certain by Digital sales ongoing last

million $X.XX and the on $XX year reduction leverage the Due basis tax described and the related to slightly by Marketing, from tax benefit net FX. expenses valuation $XX last I and Hollister Although of adversely compared a to stores on and income by $XX to a offset administrative year benefit decreased declined charges. diluted per allowances a down last This flagship for the with expenses million of by tax in was sales. dollar was down $X.X expenses of cash basis, Soho loss basis $XX by per also controllable QX. to diluted in-store noncustomer-facing exited impacts $X.XX driven were performance-based additional year's and equivalents establishment a $X.XX impacted Operating dollar XXX with $X.XX. on Stores the our factors strong decreased distribution and included points same included from million position a a operating due financial dollar billion. general certain a the to Net for the last at results increased partially compensation. We $XX year exit of and of related marketing a basis, charge compared year cash liquidity year share income from to lower adversely primarily was exit costs, million expense net These included EPS FX. million, and share total billion other benefit effective approximately impacted COVID, of $X.X rate flagship.

XXXX, capital and XXX store For feet XXX,XXX by digital, amount, related square year, stores the $XXX XXX fiscal footage we X.X approximately fleet, we to is flagships XXX,XXX and related expenditures square million On $XX and had is nonflagships. gross million, closed reducing or technology the including XX%. maintenance attributable with X to to locations million and needs. of from flagships nonflagships, approximately in Of remainder that

compared into omnichannel current our economics transform significantly the prototypes. support and was have business stores and markets size in into growth reposition time oversized led the to support right look stores to this right the a to It spaces certain have profitable ever experience. the year were closed future. digitally model, our to to is to it smaller of close more majority important the As than that we The

flagships. expirations. Brussels, in COVID fiscal entered exiting on early has renewed Düsseldorf Munich better restrictions to our of are further for or in shop. last closed XXXX. and The and are natural Please these committed X. and details our that been exits of opened markets lease its Dublin to closed the Paris, result to where XX presentation align we and have and We customers related lease London, closed ahead will XXXX quarter. investor flagships, Fukuoka store for a Madrid as not March refer Regarding expiration to discussed reopen currently with locations with with looking last due remain

Looking in locations we XXX for renewal have XXXX. up roughly ahead,

and close to stores continue fleet. thoughtful to experience. build approach new will see on a are fleets to they plan critical as we opportunity of sizes. XXXX, new our which remodels with We Abercrombie the XX and experiences We be We delivered global continue the and right included rightsize part X omnichannel more to U.S. the in XX remain our to to fiscal stores, X committed

our the prototypes introduced approximately our format, with Hollister fleet end in a up XXXX, earlier. capacity its of Reflecting global of which chase conservatively is of XXXX. approaching finish percentage half a of we're updated will DTC manage for we digital I'll tightly the modern business demand, As how uncertainty, stores, higher inventories, to and with ongoing position expenses. global for continue manage optimize

We also customer-facing will savings put realized in XXXX some areas. of in work to back the

regarding planning is and we chain sales the much to recovery although restrictions, today. store too ongoing year, make recouping to an losses, constraints provide uncertainty supply consumer For outlook are the progress COVID-driven operating there

profit and For will inventory continue the potentially rate, to manage maintaining XXXX tightly with progress. on goal gross building of we

of the aforementioned rent expect XXXX, OpEx, savings reported to closures we negotiations. occupancy reflecting on and incremental store For levels top in see

We we of the also digital marketing, and COVID-related as and investments. back to lap come expect certain see closures target offsets data as acceleration expenses

we continued cash restrictions. cash store committed putting we work. above as closures Regarding half through first to said, carry manage minimum liquidity the capital to and That we allocation, expect in levels and to are

and digital As will currently of OpEx capital in around the business, $XXX investments CapEx approximately investments. to at stand million the that for always, half technology. year, including related prioritize with we and

other continue to and/or portfolio. brands acquiring our launching brands opportunities, including to expand will new We growth evaluate

shares. from by the of paying to We've look share increased authorization continue repurchase delever to will debt the balance million We previous and economics shares down the XX million total at to our X.X a work. ways authorization sheet of

share to repurchases, pending our will share in market business. focus and on investments price the Our dividend accelerate Therefore, ability remains suspended. we conditions,

store XXX closures Net to profit the have basis not from sales do and certain XX.X% to We in when countries government-mandated levels, million. points sales from be today's planning at follows. up we in reopen XX% on Europe. may XXXX be year. as are Gross increase we $XXX first up will an clarity For not to QX expect of quarter, last least XX% currently do

to project As non-GAAP ability XXXX are we lap $XXX are in improvements planned single lower and certain and COVID-related digital operator, adjusted level of XXXX AUR year's inventory promotion questions. cautiously by spend. and FX impacts, higher expense, we optimistic excluding clearance of our the drive benefits. potential to offset fulfillment to we realize With Operating and is occupancy, digits up through for savings, ready that, in higher low million, reflecting activity other marketing last operating lower income, the return COVID-related costs

Operator

[Operator Group. Instructions] caller, with Telsey, Dana our We'll take first the Telsey Advisory

Dana Telsey

would or grow? into what had brands. are As XXXX enhance as seeing you then how comes you What And portfolio? back going lastly, savings port congestion, the forward? acquisitions the inventories that much you you the at other would and you for that are think planning you of just fold Scott, that you're about on XXXX, you looking in look And mentioned how

Scott Lipesky

Okay.

Let's right. go. All

it. look occupancy, talking store made on had every at of our company On one back base. go all made the through progress store really in where and the will some that's We much how will year. the on into progress made expense so great are in savings, there stores that started this great QX in significant reopen be We as hits. We when closures. the XXXX, expenses as first as COVID we XXXX, this but we cost question, make furloughs back. stores we'll progress, that took come and Hopefully, progress different hopefully, went we open come additional as a about lens we we And our

we're continue to then So our -- perspective. the see continue to than But back. to spend digital going marketing to teams going we'll We right. We're doing we continue as is digital see what go better message business. through nice make strong expense connecting product They're And some a we'll marketing year. increase as then from strategic nice that the to product see fulfillment ongoing come to our The have. are we ever we that love investments.

we're to and investments continue And the there. invest So digital going then last piece make to in is we'll data.

have opportunities great there imagine, can you long term. we As

other that Okay. us When the will $X.X brands. come this gives the in into at you is that $X.X throughout liquidity, it back have. one were with, position opportunity pivot we acquisition cash, a year went the I billion Yes, we've of take XXXX. financial look looking as in that we the billion step and flexibility for we

brands could we our brand well like we if new that. And we the flexibility. is to it or significant Europe, the balance sheet, brands company, accelerant. other have be as and a as space opportunity for build can a white APAC U.S. we core fold brands growth strong. in opportunity But is each launch in with additional other feel specifically an This at that brands, recapturing Looking us. brands, acquire is as it's growth, one whether or have driving due that financial It's about

it very Okay. the in port here. a port. Last issues, piece is The situation difficult

day sees Journal everybody article. think morning. Street the up one It like seems I the you now, there's in per The whenever open Wall

doubt a is it challenge. about So that. There's no

West but can on market do the in is a There's there, we the all what's the air difficult here an in I read Coast challenge. think port so react. imbalance everyone been the a of that's out containers, around and There's sees world happening U.S.

has of We as is amazing that team have The managing an dramatically we've changed this gone transportation this focus throughout team day day. by XXXX.

to deal then in down the on constraints to customers it's And it trying was the world. of was chain transportation, it shipping First, transportation slowing the around products really with now QX. supply

and read react. we'll So

those much We'll can. We have flex as around great world. the as partnerships we

a deliver timely is basis. on goal to Our

Fran Horowitz

they're prepared nimble. underscore, to we Scott last managed 'XX. And are and whatever in They job Dana, we Just A comes challenges the that in a did and same on out one. shout terrific see some to deliveries expect team XXXX, through of. agile, for that in from our XXXX. just They're out to to

Operator

Our next Paul line from Citi. of question comes the Lejuez with

Kelly Crago

U.S., I just bit here that dig Kelly positive? total a Is first, And to Paul. on a color overall any is would maybe in comps further fair reduction were close pretty on brand Crago This Or in little by statement? given in square significant that could it be say the to for guess, the you fair assumed footage the helpful. comps? that's

Scott Lipesky

comps talked this Kelly, in we year. haven't

stores our and closed in Our net -- that's us. to very close of sales, been the talking majority in so comp been here total we've for very, late January,

So nothing much add to there.

of of too terms to the outperformed the we add U.S. a renewed Europe. there The across not could outside put performance, outperform bit Hollister as Abercrombie with in release. you lockdowns in the Europe, what to continues brands much imagine, In quarter.

gone the I'd things So are out playing we've consistently say half. as through back

Fran Horowitz

Yes.

Just to as larger a and has a larger Abercrombie has store digital a quick reminder. bases business. penetrated Hollister

the also of closed Europe, because that's And Scott so business mentioned. as majority influencing in of the stores were

Kelly Crago

then, digital-oriented is I sort customer that less customers. was of pretty Yes. And focused? guess digital assume Hollister I would why exactly a

A&F of a about Hollister here picture bigger consistently Just that kind even underperformed pre-COVID. has

perhaps where will about Hollister? what talk progress F you 'XX you address and business that in forward? you far to So made you need have happening going that in margins you relative that What just to so think could out peak think overall shake is

Fran Horowitz

base, renewed and Hollister the seeing the The marketing team very are the base The consumer. off, with top Hollister that, key our for And difference has on is think is I those we're does. we larger strong our resonating digitally Hollister to you're with size focus of and start our go they In what is incredibly pleased and a kids, XXXX, socially store The well product in savvy, the very a items. had they store customer, team than referencing, business. to XX Kelly, mall. to success like the and Abercrombie but really we are items. So the went also our

will was head both as digital certainly we and brands So -- our brands that XXXX, and future that expectation, did business of parts regions. both the across as into through grow digital they

Hollister. with are we where with pleased very are we So

Scott Lipesky

just piece an gross close up so our it expanding forward. performing the perspective expectation margin, AUR brands on margins. go well I'll of from that's Yes. quite are and last All

have inventory recapture and it lost that years, the some with with really That's focused we're on. we've inventory and and brands that to We opportunity management. strong to starts starts of continue across what over lean our products, margin that

so on we move the as And through hopefully, progress XXXX. 'XX we can build or made XXXX we -- in in

Kelly Crago

year future? Got could 'XX Thanks were any flagship the way more X just near there the it. on Is of what on one last update mentioned where you to flagships, the Any those the the I'm closed out that. every single flagship P&L? you close make I opportunity of you've ultimately just ultimately drag F that that you stores see for think this And quantify or And in exposure. in about And where want to are other getting opportunities sure right we lands? -- question.

Scott Lipesky

can little at and excited here for opportunity It we're X we've up added at We've Dublin, levels. that these in areas. a XX big not in a There that tougher collection say closed and call. like these about It frees points month -- XXXX, -- to ahead be our Europe Long back, lets But point. stores reopen this more to year, might more I'd that month. of tourist-dependent but in had more on last the tourist having versus store X reposition expiration a term, We those talked X our The looking pretty is on large it boxes about some we we'll across expense us. had or the dollars. of markets X. local in Ireland. Ireland a us a and us of we in op that in or haven't of are margins, rid X spread giant this heavy of across XXXX gets the hang one with things likely markets basis there updated very will its to majority we locations. bets lockdowns closed base. This of X flagships. drag out due stores renewed We about that's store Clearly, this get

looking locations and these does markets. the in right each So we for what this we're like of for fleet, now

Operator

with Needham. Ryan from comes question Next Vaughan

Ryan Vaughan

to One, great job the see on quarter you. Two great And footage square the and for questions the store year. rationalization.

size, prototypes I with to Scott, productivity Can or that think, your billion average two, expect smaller improved X,XXX. sit you're heard the on you just say and seeing X,XXX are $X.X on store Fran, of number store the you you touch the cash. you I with either see And size? then

a year. this free of generate flow to cash lot going You're

$X.X the over, online, with and it, for the up of years? it does billion, $X.X next set billion, $X and today, the the ready with platform call infrastructure, explosion Just couple is distribution billion

Scott Lipesky

I'll then one the Okay. second Fran over the and it first. off for kick to with kick

into coming supports cash see the we billion. XXXX. was March in saw growth Didn't flex last expect that infrastructure to big XXXX. to the there see that that the in It our So was but tee sitting year, yes, on up we it $X.X great as saw amazing year, growth the of nice balance first in

expanding As we and Coast That we the in facility in open facility XXXX, on later the of West forward, that new the at XXXX. planned we'll a are here beginning go was into U.S.

do and needs. And network that flexibility So that's add can we'll we continue We're infrastructure at our and constantly have financial way, expanding that, profitability in our smart a make we can that. looking do always wise. capacity, We'll keep We're to make network sure customers' do the demand. to with part globally the this studying. we to to fulfill sure of need we transportation DTC to if the it up

Fran Horowitz

acceptance XXXX. the They're some really They're we stores, several customer have we we finding new both productivity of regarding head seeing and hundred for We're as years, the couple over into strong those opportunistic exciting opportunities. past continue efficient. them. opened, omni-enabled. They're to smaller. be And Well, of the brands. to prototypes of will about

Operator

The Susan Riley next B. from with will Securities. Anderson come question

Susan Anderson

quarter year. color then I first could side how occupancy, of benefit? get OpEx items if give and on significantly job more in with the the from FX Then think, those managing last first of you can OpEx deleveraged other Nice higher, much guess, wondering 'XX? I the deleverage back And you year. the being quarter for on I through some was quarter. How much will

Scott Lipesky

so Susan, of a pickup was about be happening. going I'll grab some were the thing interesting But good in year. see things and QX, nice store to Lots the to one. this full is occupancy. yes, Yes, QX very OpEx we'll continue

payroll where can to year-over-year year, one to negotiations some start imagine, in QX. last come nice see pickup we'll the As is done with closures, the have continue see that store we'll you we a Store expenses in. back rent

closure the we the the year, in of there end that March, up of of With April. went last employees so stores OpEx-wise our of benefits month furlough mid-March towards many in on picked

come hope. in open. the some That increase projects. we'll in, So investments and means that we'll digital also some are And see we in stores marketing

that fulfillment about business out as increasing as variable occupancy we're adding we're in, be low taking we that digits that There's there, looking expense side that is and some our reducing in a you all as going well store to by back the when So payroll, is the up cost single million. side swings when step talk of take at last year's great to $XXX back wild an but thing marketing. fixed

Susan Anderson

Great. on That's I'm And curious helpful. Gilly Hicks. then

talk if what sure think Not in Hollister it's longer some big then percent your you maybe size, to XXXX. it if If growth now. can term? gotten be the there color about And plans any how on you but of Hicks significant can drive maybe to Gilly give you could is do

Fran Horowitz

we're both been a that So Gilly, received. of well this year, like product response customer to as perspective and about as launched we the some a Go Gilly the from well categories the new to messaging excited really has

Obviously, Hollister we -- is of the excited would point. But Gilly. say, brand. for our percentage, at this discussed what smaller resonating. nonetheless, launched consumer strong a affinity a Gilly lot based to percentage super It discussed not have brand so how not We and on our it's have I the is associates was from yet business. the We about we decided feedback and at

new to stay. where you So continue this headed, about we're as to and we're And excited to continue update we'll offerings. year have come going things we're those to

Scott Lipesky

Yes.

been excited about We're teams. a to the our plans. Gilly. thing add. We're ahead always the for building investments making is we've building Fran says. we're marketing Gilly. And one We're future opportunity, as to excited Just in see This global our

Operator

Jay with Sole UBS. Next, we'll go to

Mauricio Serna

wanted I questions. is to Mauricio ask a Sole. Serna This on couple behalf Jay of just of

maybe in bit little business? into of the been about then get but talk to far translated more over color I a of XXXX the that year. could to you costs. exceptional If has you could levels. whether February has to leverageable a margins has provide some compared on disclose stores, performance your so don't last And the growth digital if How you profitability made just sense that the business know [indiscernible] the compared fulfillment more

Fran Horowitz

where we pleased but us, product our we quarter, are. where with consumer. continues the messaging still for start with some month nice of quarter to with quarter, with pleased resonate to of and the ahead are fourth our smallest certainly It's and We some the the we're coming the our off unknowns momentum have

kick second? you the So can into

Scott Lipesky

Yes.

that profitability reduced path store is We've The the we've the the pleased the the over And expect. with gotten On to second fulfillment been we've quarters. able flex really way you we've margin. expand last We've kicker is we've digital would been seen piece, seen occupancy. X nice gross up. that there

the variable. and half. the side want profitability reduce way with around to of to So in pleased business we're try store make that's to the continue to the into model transpired solid, has been and the going the take fixed occupancy the here more that's the formula future. we're And back We

right profitable. profitable for look progress the that. XXXX P&L that we feel that led cost take we and Great business into We and structure. and what the digitally And building be focused We more can that's right to as can we're we in building we're feel we that beyond. made a become be so We're on. XXXX, model,

Mauricio Serna

region? how Great. last And think in stores one. one I the reopening view I remain the mean, if should just your mean, may, closed we EMEA of on I about, that

Scott Lipesky

right we're I now when and that our control, the of throughout now reopen. out past, we've doing what the same sadly. wish these almost Clearly, will is year used a we playbook knew stores

to We and click or through from shift As that stores work digital. pop-ins. moving inventory quickly when in-store to close, or keep we ship collect store

that leverage to long open continue the stay We'll the playbook. until a stores, playbook hopefully, that's So for term.

Operator

with And we'll Matt go JPMorgan. to Boss next,

Matt Boss

the the gain market you guess, Hollister brand the my as share by we how feel And do versus of to at exit about X Fran, with positioning the each that, pandemic largest opportunity you I category today concepts? where think is, Abercrombie? is Maybe, do at question

Fran Horowitz

several is is both so about Matt, past I ever global of worked appealing A&F. positions. We've team and those Hollister feel Hollister is young where at position And millennials. the the and solidifying to the better really consumer, A&F brand years than for our that

resonating, So job we a are is so close we are marketing. our to very steadfast with being The really, doing was our customer. and product where great are. the And teams

the to all is go denim in becoming we're first but She gosh, think so you straight rises with be The and terrific. category. jeans, The -- that important. categories women's our that, There's putting opportunities. out today, balance, would there's fashion even there. is tell we is business important. less important skinny for different Abercrombie exciting many a responding denim I to a are less the it's jean which now shift It and new in more becoming is that has fashion,

a opportunity denim has business for another continues for good outerwear example. fourth category Abercrombie a an us. We quarter. Women's has to coming be has strong of a and always been Outerwear So strong certainly been -- must-win us. had out

to brands, lots across of So we as opportunities. head 'XX,

Just dresses. one last one,

more was grow. expect opportunities that to there's 'XX into to we the we half, consumer be back Women's in business very social, to and Abercrombie continue dress Our our Once strong. even business for get

exciting lots So of opportunity.

Matt Boss

about year On what's margin puts think and a And inventory then takes, follow-up. then best takes? way comfort margin peg product with this questions. XXXX puts the some margin, and think way What's about gross guess, think about X-part number one? your to gross the is we as this we -- think as hand, basically, we to the as maybe, year best and change? I XX was and about XX.X was to gross as What's margin XXXX Scott, the on And of

Scott Lipesky

All right.

coming with down the comfortable were quarter. are X%. X% quarter the down we yes, coming part, sales inventory first the On into into on We

have than continue last lower clearance We year. levels to

genders, excited are our that. We about in and we're very mode chase and brands across

takes, then a On come And more will in and thinking Cotton discussed positioning want little inventory mentioned, of brand and hopefully maintain of things would We've up place. right it XX.X%. down the there in There's still -- puts XX.X% the an we the the Hopefully, across transportation. year those place, interesting lot on The then I about way of XXXX. are in in the the margin say. recoup favor a Fran our But I big a way happening would the across thinking has in that is we're XXXX the out some in be of already across in market. general we did and on But the recently. be and tilted still the other dynamics, apparel market. is out would A that fallen other the market. the that lot headwinds, retailer say, side, as of supply-demand can demand we're industry With is on the build to about margin, just XXXX. is company great of top in we in volume picture, XXXX. has bit

great continue a we Our product higher. push that want and to messaging place. all to of leverage to is AURs And in

Fran Horowitz

going that to inventory to nimble underscore And reacting probably first how that close we from best and very one sure our one 'XX, we're if to. very really of managing to head staying team that that learnings want into is the part we XXXX make COVID. the with tightly out and took are a and of business of our to yes, Inventory important diligent and we're And management learning we agile stay question. just the was I

Operator

caller, [Operator Instructions] Jefferies. Janine our Stichter with We'll take next

Janine Stichter

about chase quicker enabled change bit into mindset you and workings a you had about talk bit a inventory dig inventory from just gotten chain, into where the around the little COVID. the the that's in supply comments you've to you've better wanted need. to Maybe back-end I the deeper that how some of

Fran Horowitz

inventory very really fluid around when about excelled we set I COVID, so and got react the the and they much candidly, monthly focused up and and at normally the because open-to-buy to we biggest one. team year. headed happening working has there been into that on to world XX Janine, the can think has something would team inventory their It's a how with with management be once, as team, their We we on example, Scott our for our Keeping agile team in changing incredibly business. very who with into the but sourcing before the us meetings weekly countries closely basis. all was work

a how the -- and it's run every see week, business. the results every literally we week. product chase, Regarding after previous buy we We single of part the

what in ingrained just we it's So do.

Janine Stichter

then and All just Hollister also remodel how do you're right. a And year. follow-up to remodels. the on more at new it It update Any on compares this like the sounds experiences to performance planning Abercrombie?

Scott Lipesky

We XXXX. experiences delivered, new yes, XX in

in XXXX. that than more do will We

markets. We our of opportunities, continue in these to some work reopening stores, closing through

more because that's stores as to shift enabled led in as stick there'll remodels. measuring ever we the are smaller, support And this format year We need with are the digital modernized, COVID, we on remodel what So XXXX come as model, of with was be business. tough to through the be then demands. the impact to the digitally a a still positive these our there. there we go stores to stores as performance, that become digitally The but customer more

So we're they formats to that can sure make our building do that.

Fran Horowitz

the What's exciting offense we into have. that the 'XX, and heading is sheet balance

globally be right will the right opportunistic location continue when spaces to We available. become size,

Operator

next Fitzsimons with RBC We'll our Kate from Capital. question take

Kate Fitzsimons

then, be to on get with an focuses nice saw guess, earlier inventories? curious are environment for really back update was you us Scott, some that level, time made much experience, quarter. Just in to last the your What on prepared again, XXXX. comments customer? I promotional were That demand. business you guess, to when wanted are on closer loyalty initiatives. far to Fran I coming environment. making below in analytics, the Scott, us at would congratulations circle you into in data, comments, the inventories or higher the said And that outpacing And some demand rational I your this give Fran, a of noted, the about allow the that your to clear quarters the a be helpful. perspective investments Maybe there. you

Fran Horowitz

the I will off with first question. start

And we're what closest take win So the you strong acceptance. us for today, has us. the opportunities that certainly mentioned really the answer with is seeing also That 'XX. -- the learnings it's That's been as our into as a long are, identify the head coupled to helping been time. the fact as I is man, mentioned, outperformance a earlier inventory of opportunity product but those to those very consumer we is big

to and able our reduce during exciting. tends in were the promotions promotional most quarter peak. It's be through the rational. been quarter it's and the week year, holiday So we Fourth even yet Black to of Friday

us. a big exciting for one, opportunity So very

The second part, let's see.

closer on continue helps our customer. to getting consumer data using building we're our up mention, team, analytics consistent insights a We're those us did we closer to our that opportunities those Regarding teams. strong customer, experience as customer team up to team, our we're to basis. the get got user to We've a talk building

channels consumer. very strong can our have in with our and we social also conversations digitally So where constant

Scott Lipesky

be agile where feedback to invest evolve digital our experience. that. gives we're that It our continue opportunity customer a quicker loop can to dollars. react continued That's a enable modernizing us infrastructure have updating experience. We building, we'll also and more we're to We'll we our whenever way then in a data

this necessary building. continue business is we're So this Again, the excited led excited infrastructure the as about to that ahead. and to shift we about model, model we're a digitally opportunities

Operator

from Janet comes with question JJK Kloppenburg Associates. next Research Your

Janet Kloppenburg

balances schedules if questions. channel? couple with that that is you you maybe there of Just moved think the happening maybe Scott, look about wondering to are going points that in the fourth how A of out. digital the on hikes? of a you've I'm going in And brands. give in quarter. for and us an inventory this Should the region third marketing business offset second U.K. tailwind opened the in we year, for what's Also know it Just Fran, was in by many trapped for think Europe level APAC, the payroll Maybe equal down And what's that or they're Shanghai. -- occupancy, outlook. that what's about I could Scott, realistic. on mid-March opening basis that want talking XXX an understand and just accelerating the on is office first, and there I in perspective you and on to

Fran Horowitz

Yes.

I Janet. start think we'll backwards,

our terrific progress. to it And excited is there. did office. is mentioned, making we're we're customer. And it's our as region. getting Regarding pricing in talent up the in how smallest, we an We products and APAC, and and team of open newest charge really put messaging. some you closer That I'm

We which a team, have do hard the We and year on and New Year for that we're did particular received this Lunar an collection working in was opportunity consumer. brand region, through well successful by very that. awareness improving that

the as future. to into continue I be about region So optimistic head we that

Scott Lipesky

All in with I'll EMEA, comfortable levels. inventory with those start right.

we throughout on teams, Our the knowing holding allocations coming been to that don't the next back day. what's know pandemic, stores have

living for been have of of been countries kind through locked been we've through we've Many so these pre-Christmas, down this so a while. that. And working

and in that would going things say, out but way. of control. see see. inventory is only going vaccine we right distributions my what in rightsized seems knows, Clearly, the up U.K. digital. the well, Hopefully, we reopening, learn I flexing more. who as stores mid-March It react we've in the you So are We'll are our in answer. like The

the total, gone we react back as continue detail into should throughout It XXXX more. that a we'll in as go bigger abatements we we whenever some bit we progress to XXXX, So some levels. step go into be opportunity likely as as we've learn QX towards there, see we those in a as going to the but little here saw, we about through quarter. the closures end. not hit versus different of XXXX I'm will think Occupancy,

So here we benefit versus a see year. should QX in last nice

Operator

next comes the of Your Baird. from Altschwager line with Mark question

Sarah Goldberg

Goldberg on Sarah is This for Mark.

updated front. business an hoping of the view the and year on I to of over you'd a store give just First, longer-term EBIT margin on the changes given potential positive And the selling update social the learnings was then all secondly, the past fleet.

taking on seeing elaborate you're there further steps you're customer the and acquisition maybe just If on cost you some trends in the channel. could the

Fran Horowitz

our EBIT regarding we committed still potential, are the Sarah, margin to X.X%.

We in closures put lot make and are 'XX because the through your XXXX. in of out about not were we that able a to progress inconsistency continued business. it to the there to the that we as on excited, point, a still manage uncertainty We've date has

a with date our is eye still So point. on number, at set that this just not

Social incredibly, exciting selling, incredibly for us.

way very we're Abercrombie Instagram as and our new on In in social built our business. quarter, brands all to using exciting a fact, to channels. particularly products we It's it affiliates today. very of into sell has other had these a successful do

is at Another selling has Hollister our and how product to social resonated channel. Charli and their great that well example on with them Dixie partnership

So new It's to for very business. do way exciting it's a us.

Operator

with Marni we'll to And Retail go next, Shapiro Tracker.

Marni Shapiro

what then DTC hit right, XX%, also inform behavior just for her is the the onerous? stores that that bit The I little are in other have I less seeing the set things. guess, could regions in change is year? seeing been Congratulations. are to she's regions? you a in helping And think Could where in company about, talk you you on just Are restrictions talk trends, lately. fun much regular stores buying? basis you be so already -- to a a X just you how about And Regional

Fran Horowitz

Yes.

Marni Shapiro

imply that so I mind, But shake stores not amazing. -- should the And closed guess, guess, what does is out well. that higher guess, I imply I that should at. that what Abercrombie look hard as your in that? at? And really does surprising which -- to that's that than was But post-COVID,

Fran Horowitz

The results about excited year to lean we that COVID those is prior digital made incredibly super our able that this to exciting. are were investments into business, to drive we Marni. So we

restrictions We some going are these consistent being The we going as is store go to customer openings teach more lifted. learn of this year. to and us into

digitally learn this those business but is year lot a to make So we answer the we're are led to to a to continue XX%. We're going going investments, that. to

Regarding morning, business to U.S. during regional obviously, consistent times trends, more of Scott our this couple point be a at the has as the the those and continues stores been our strongest with -- discussed reopen open. to and some business EMEA, stores quarter. anticipating with

Marni Shapiro

differences regional Are you U.S., not seeing though? the within

Scott Lipesky

more Not you're the some like there. open, a that at I'd the dynamics dramatic. say, When Florida, are look Texas and you states of the little, different seeing

some of You also some strength coming see, there's stores, the those lot Florida tourism a specifically, but of into still you do markets. key not international see in

some those in they're missing tourists. still international of because giant down dramatically that malls, So you're pretty

Now of similar, customer less where the have some across maybe local customers. impacts local other versus stores of will there's than some the border movement there some the those In is border the a places. Texas, bit stronger little

kind strong coaster hot thing kind each regions, business good It's digital teams stores a of of of and and all a managing been cold. and go the open remained these by markets these the as store store. has So are roller is across our

give point, restrictions and point do bit, a at all a the or little better can that's softened So get read And will we where some to us hopefully, feel. is a are we'll react. lifted capacity and that

Operator

take Dylan we'll our with last And from Carden question William Blair.

Dylan Carden

drag curious, you from Just sales from flagship drag Any the stores this year? you and EBIT probably... closed have either you the handy or Do that margin way could Scott, of kind you quantified do closings. the

Scott Lipesky

Yes, sorry.

stores we we fleets. underproductive is than that that productive majority less so made with majority the the The have progress on this this the happy I stores are number not provided versus occupancy. rest oversized, have year closed of we're would of Abercrombie a the at We of The the that say point, what stores. are are stores other and

And -- enabled so reopen close position for digitally in it markets was react a hopefully us of quickly of stores. stores in in these good to and to some ourselves time and smaller put some larger put these a us

continue to for we where the believe between right for come market move productivity we the So as when right see firmly to and this we'll We'll flex doing normalize, the back make to go up occupancy the out starts to we're malls, as the -- back to us P&L out. balance continue we fleets expense. see But the as time digital. and fulfillment shakes the thing people

Dylan Carden

the natural Abercrombie of these efficiently does is follow-up And that clarification. the closed of stores, I talk a markets new particularly in Did build I filling And way, side, right Sure. to kind guess, there? you've When of prototype is, about kind on go some of more flagship? where the guess, there I more out a just some beyond that thinking stores? the get that of you

Scott Lipesky

exactly. Exactly,

markets, Abercrombie You to for financially some to we In are we of been going to some these closed Fitch so We've the to the some reopen stores, that in these larger talking these of markets, but we've right try need have made nailed economics. progress process. and able accelerate rightsizing willing stores. We're haven't location these of at right the much it. & years we fleets, as that

to us we're we brand. go accelerate of talk that our to And some that help opportunities will continue landlords we So hopeful these evolution moves for forward. that as about

Dylan Carden

And here, one can sorry. squeeze Okay. Great. I just I'm more just curious.

margin the just that Are allowed this the strong to improvement that -- some kind a scale spoke Was You going strong things margin? side that more margins scenes on quarter. profitable in behind of tangible business to forward? of factor digital there be gross

Scott Lipesky

the those right expenses, again, flows to expense. fulfillment it. gross ways you cost the far the a rest base, is bottom pretty then and the to It's much in line biggest X and to there grow Those margin. variable. are the -- X nice leveraging are The fixed those then that levers is That balancing as just said, see business. by the But and

Operator

questions, back further additional over to for no any or I'd like to closing Fran With right. the call remarks. All turn

Fran Horowitz

progress right. our you our Thank on call participating all call. We sharing you in All first to quarter look our for earnings forward on more with today.

Operator

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

Abercrombie & Fitch (ANF) 2 Mar 212020 Q4 Earnings call transcript