ANF - Earnings call transcript Q1 2021 | Abercrombie & Fitch Co.

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Operator

Ladies and gentlemen, please stand by. Good day, everyone, and welcome to the Abercrombie & Fitch First Quarter Fiscal Year 2021 Earnings Call. Today's conference is being recorded. [Operator Instructions].

We will open the call to take your questions at the end of the presentation. limit session. one you question during that answer and ask yourself question to the We time, would this Pam At I Quintiliano. over the to call like to turn Please ahead. go

Pam Quintiliano

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

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

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

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

Fran Horowitz

calls have COVID is to a since hard of believe passed It morning. earnings began over Good world. impacting that first the year

our and stronger, our to customer. to have new uniting discovered have close teams During and that thinking ways innovative time, smarter and become nimble, more we foster of stay

quarter. key transformation our exceed over rose base, report revenues were of us operating during to from experiencing since Sales In largest QX, years XX% one our feet which up levels. delivering across U.S. progress the million in First financial We our and or gross digital we recent quarter our the enabled removing metrics evidence our roughly temporary on square results QX, a X.X have XXXX, the store initiative, basis. most global and grew last pre-COVID both improvements compared market, XXXX. despite two-year made EMEA XX% X% while income significant best to closures against two our are XXXX key of XX%, our sales

Our gross margin margin basis operating higher business, basis on XXXX rate points. proactively our the in points eye rate I'm We rose XXXX was that proud to compared keeping XXX extremely have an long-term goals. and accomplished. invested our we QX,

some promotions strong from substantial tailwinds, years. responding several product This target unique reduction reflected our customers of been confirmation is last that refined driving have which benefited documented over all spending well the results and significantly experience our consumer across to brands, voice acceptance in While and product, markdowns. further

For above with the a margins been revenues year-over-year operating store ease revenues all Digital, COVID is increase. for restrictions store Hollister from and the carry in brands. rising across a plan standout remained growth our to is with as and And similar quarter, which XX% improved XX% has rose region, continuing even was which QX. channels strong XX% the total This upbeat traffic four-wall and by U.S., largest market our above Abercrombie. XX% well to

quarter digital compared total quarter, sales. year, the just of last first For revenues XX% grew XX% to

as continue leaned we marketing customers our to new We channel efforts. into add digital in the

and customer spend high increased. per is attention customer Importantly,

Western open our XX% quarter. This ended sequential end Europe. of of digital XXX with stores majority or base to open basis. strong and pleased We on improvement results, our our the both fourth of a XX% our to approximately the to our base addition In the XXX of realize in with at of quarter performance the stores were in compares year-over-year we closures

sales rose last store global year. the XX% quarter, For compared to first

continue balance to We product messaging. omni-channel our talk to a approach and

Jean, unique continues them right From win, from offer At to categories Our each new women's millennial trends wear silhouettes appropriate latest one trends the sizes. that majority which Abercrombie, and us bull's allowed each of first and fleece promotional full customer best our eye brands our basis. a a wire styles our were of and our of brands jeans top and linked the margin were on is significantly into for teen price our growing since and now, of QX responded We jean quarter products. the of high-rise and rate our and quality jean are across points. ways away our to love sales events. growth to fit differentiated huge to including achieve in also to key one which of for and XXXX. Hollister, through style women's She stepped at we our Ts, two-year brands, added extended jeans in be leg hit kid, collections dresses, to selling

As jean top our customer silhouettes, price been experiencing full adopting great has latest we been the selling.

and promotions. are you including are disciplined value entire commitments, we our revenue for assortment. our being wait to We work, with our viewed have transitioning our outfitting creation for inventory an inventories buy XX% pull site with down X% while mentality sale a hard clearance, We when last into ended chasing it year After from omni-channel years it progress promotions across quarter one. appropriate. as category successes on of markdowns a and balance recognized great now where the winter destination proven to exceptional specific many and We customers made see remain back in away and increase. We

in all a on women's, and growth girls over our in best A&F Hollister girls. margin experience kids, and QX boys and cylinders decade firing are We

from expanded quarter XXXX. QX, XXXX. operating growth to At higher making investments our while results first In future our to support manage over grew technology marketing, by margin is we a to As strategic our tightly since across the to formula we've this expenses since X%, profit and same XXX basis working. points rate QX the fulfillment levels time, last and continued year growth best

for helps results to across app, resilient Group, we to The authentically World including a pop-up pandemic surprise illustrate ever. slower In the speaks Our most and to kicked care health Project. Steve years Month we this Dixie teenager school mental us was change. with their health Black color our well-being digital Abercrombie and our mental omni-channel Annual D’Amelio. racial launched had that wellness has stars by At adults our BIPOC of rather digital was Black lens, into better We've first the the they our accelerated part February of refined our on devoted engage great stores. Abercrombie, a global March, Equity from podcast, first customers to most. our several Fund, customers path enhanced for Associates for social and Health brand The a our communities. do who words. in and customer own and Mental with Day Hollister opportunities been that work our is retailer. campaign, host for a virtual executing the justice teens experience and than that young to that organization our History Teen TikTok messaging session introduced In to media, about global of emotional QX the are than from collection Academy progress, a our with where therapy We've evolution partnered with speak amazing high We've quarter country, which topics websites with discussions your on its a the Month History unlock careful This second off mental also how equity people across spoke partners about we designed collection, students of the supports

our social others which help the appears last the to purpose content to series, April, second Nickelodeon's season to a lead the For accepting we kindness The Channel. on and Crew, successful place. In with is more Kids make year inspire line of in world launched YouTube kind, compassionate and with Kind

performance. Turning specific brand to

global transaction continue strong drove value where Hollister, customer with at growth. remains on pleased Gilly highly AUR which result to Hicks, includes We be average higher We engaged. our team

girls, knit dresses, standouts. and bottoms tops Hollister For were fleece top,

Our guys including and continue sweatpants. to products, in soft cozy live

revenues throughout partnership success jeans. our improvement digital jeans of build XXX% X% from our more with continued further. gaming over [ph] has a fortnight including been launch growth off Hollister-TikTok In more In total thoughtfully momentum collection realized our Gilly even with active A group stores our April, sequential it's as solidify key first and and underwear a and guys excited channel At improvements the year. sleep how backs, we February, Lighthouse with kicked while Mission which Gilly's share For both will on-target XX% experienced channel, Hicks, last marketing. driver helps Go. and match jean the lifted. year, scale. business sales we prior Customers were new to loungelette you Control. in host about year a focus we'll significant to digital continue future girls, to to introduce of approximately influencers, well sales restrictions we roughly and grew of respond Gilly By We're Hollister's we with roughly challenge

more continuing fashion Moving of to the evolution to modernized on resonated adult, version with A&F traction. to brand a our gain newness

digital in genders, swim. is last jeans, revenue sequential breakout the Women's As achieving improvement sell-through. a were we my kind the history. in XX% including Success of By sales. XXXX since I channel At all roughly and strong kids, And Abercrombie moment, particular product XX% best for store and a experienced merchant, in result QX sales traffic. years well growth we and plus of there largest intimates the a store truly across shorts third achieved brand jeans, seen and had digital broad-based rarely and acceptance phenomenal grew approximately was price received. categories, sequential swim QX its in over improvement full XX across the in year dresses, men's have

swim categories is true and the girls to responded. and and included shorts, and stayed assortment boys Our girls customer sweatpants. knits our Popular Life Play boys motto

for travel, Turning activities going out and focus to our all we and being including marketing. offered on and their customer celebrations. there summer spring adults, At

essentials campaigns needs momentum, SoftAF, and anticipatory our our partnerships have been successfully to new up first men's XX of leveling We and and and denim, fashion product We and with promote spring our old on on social and that to collections. XX-year nimble targeting our TikTok with reflected creators media Instagram built have our customer messaging. their

like have new key that completed than was ubiquity one identify year. of also ever, recent The of with later time. encapsulates across eye forefront super first shift of and brands, are and especially behavior. to It we differently we we our We our to stay It's is leaning those real clearly The a a platforms us trends are of about model with the and this launch communicate and thinking social customers casting close being great roll will also with denim brands. of our great is It's allowing selling how our into example social us in how helping Tourist are and TikTok. evolved power our brands at an to happening actively and faster the commitment also us campaign innovator response latest consumer and our calls, the consumer future. for in much out towards Social theme this media an

by customers Dixie to Charli it continue and stars, brand of to experience channels, inspired and made exploration world across media to of the and D’Amelio. that the social biggest our by two introduce As social shopping digital shift a sense

aspirational estimated over Charli relationship the ourselves side have space. and power since Tourists, agreement selling of Social with multiyear out. the and has X. brand with way reception in working in new the are side media by We've million our next a sisters Dixie the followers soon was XXX a It Thus our who unique groundbreaking across is coming The D’Amelio Tourists buzz featured brand top-of-the-fashion is with design level. million that combined Social social new taken creating apparel exclusive With to million XX has long of and is online social the XX tapped SKUs May the pyramid which to family's successful vehicle. growth we've teams, directly into excited be the video. leader platform of Show, to are sell departure and Charli They'll over amazing. just will The We're brand extremely speaks pleased Working as had and available been Hollister introduced far, edition about brought live Hulu. also over Social very D’Amelio excitement and the product views brand opportunity from will on and our the brands, select digitally-led with the the the term stores. in series, the that to in including product And create positioning be to has limited other Dixie's D’Amelio drops lifestyle. Tourists been another impressions view monthly majority with already

insights believe also coming and inform provide it and for other halo a help will trends strategies. teen-oriented into social We Hollister, offer up

As established one the on first our were square with focused digital network and laser Day. we've Aligning remained operating initiatives, remains term long optimization of Global nurtured footage vehicles, penetration our XXXX expansion. we've which lever brands our our growth store priorities. is Investor introduced top transformation to margin single most at

a brand to is is year accurate transition see it are we and for Row the store Savile location closed Regent In and is Street ahead, we smaller smaller to away locations of cannot a Looking open to our more updated intimate ones. will better in in flagship London, significantly larger economics, more where Omni-enabled to more continue our we of customers last on our prototype and from wait August. format set Abercrombie representation customers shop. This local and

global to brand also network each efficiency supply addition to involving improving of and engagement. other while our on update omni-channel year. speed positioning, In including customer store investing digital the And transformation we'll our in optimization, increasing and remain capabilities, initiatives, committed chain the throughout you we

reopening it there to the thoughts discuss on to U.S. markets, mini Scott, COVID of certain government quarter, the want remained I back-to-school large take was from stimulus, moment easing Before I benefited restrictions. Internationally, a a countries although of our the turn of consumer. and first closed. health many the season In the over to

we our Europe. momentum further lifting hopefully Western to about and from to continued As COVID expect date. of Thus of has reopening we realize QX, countries think benefits the restrictions quarter a in far, key

that global this and to we will walking to goes past our more to disciplines. off see we As from are look we base last and with And year. key period states further compared optimistic all not normal open, hope it and back-to-school and more countries year's engaging forward begin we're back-to-fall learnings a while customer cautiously smoothly, away and

to will quickly our it excited I'll way. over may our and in more expansion. we'll about to continue long pivot than sustainable and the matter expect to We what term ability I'm future come the Scott. turn no And confident operating unexpected margin drive that, ever with

Scott Lipesky

good and Fran, everyone. Thanks, morning

be year sales the QX COVID, we year. lap temporary comparisons the Due we store COVID driven of to providing not to last As XXXX start this will we to closures, and plan both applicable. do comparable disclose

delivered XXXX. mid two-year Now year, compared on we XX% QX widespread basis, the net QX a up closures lap the pandemic last beginning million, were XXXX. sales of results. the onset of as March to and In to On temporary $XXX the associated we X% up store sales quarter, as

XX% We XX% which By sales brand Hollister, million Hicks, net from continue XX% includes or XX% last which to includes digital sales $XXX for total digital of demand the experience growth brands quarter increased Gilly with year Abercrombie and for strong across QX and for Global XX% kids. digital sales growth XXXX. were to sales.

QX, increased X% Abercrombie. By XXXX, respectively. for to the region were in and net up and Hollister compared XX% on one XX% net sales As a for sales and two-year basis U.S. XX%

the U.S. our As footage XX% and footage digital impacted year COVID continue fewer a a square store The to XXX by on one global footage over penetration. our XXXX to efforts optimize XXXX. quarter for as Western purposeful less square a continued European transformed two down had temporary related QX, Europe, and base nearly this the in and to store in EMEA, with in were of significantly ended basis. roughly basis store closures adversely to with square on stores In our Results of multiyear was sales compared closed XX% model align reminder, growing be restrictions year and with X% business reduction XX% we base rose and store our quarter. majority

As related sales saw Japan. reset long build In last QX, trend. quarter, term growth. XX% we an APAC, to continue the XX% the foundation local have in recently were reopened, our teams COVID restrictions to out up year U.K. China, down we Throughout we and enable XXXX. In in to and experienced uptick has to the

committed the we and successful are in the We the consistent In sequential over following improvements we in EMEA and we lockdown and in U.S. while closures QX, realized are Globally, and the sequential playbook region continued. as value. saw place average with and APAC to EMEA. conversion put QX U.S. were APAC, improvements traffic transaction store levels

located shopping opened are our are As of and for XX% XX Germany closed, stores XX of appointment. with only which in were fully yesterday, of stores by open

Moving points brands points and XXX markdowns. of rate on XX.X% to our EUR basis promotions reduced higher across QX last to XXXX profits, basis gross XXX by on was to and up driven year

Marketing for while sales tax a decreased ending made As non-GAAP write-down inventory a We've from Inventories rest $X charges, results of Operating compared last down progress our impairment cover profit reflecting XXX XX% last square of on footage and we up offset COVID occupancy cost QX and by gross this the the non compared results in-store XX%. delivered administrative discussing income of growth. expenses the and digital controlled quarter year million store and and current controllable facing our operating last primarily savings expenses X% closures. couple approximately a year's operating last media on digital tightly year million are partially increased expense two driven to remain and of Stores excluded $XXX and an pleased This was the customer charges now general expense our and rose operating shipping excluding expense $XX We performance reminder, of primarily to formula included to X% years are unexpected increased XX.X%. last result and operating reductions year. our distribution out. great to is in a been expenses basis, to the I'll fulfillment respectively. loss benefits. and rate X% other spend, see to of an costs. it the store and as non-GAAP basis adjusted year. compensation pre base points by partially of we as have offset basis, year XX.X% last from year, percent in million as and asset in of past marketing lower by play million for year significant to seeing $XX compared related based decreased income

assets Fran rate noted, $X.XX tax last As and allowances lay was diluted this tax share income since net a our loss margin first diluted adverse compared per valuation is was $X.XX of quarter Net $X.XX of reflected deferred which year, operating adjusted tax best income approximately non-GAAP XX%. share. charges and to Effective XXXX. other basis operating on the per on impacts

reminder, As liquidity of to fuel sustainable billion a deploy exited make position cash growth us $X.X XXXX financial to strong total $X.X fiscal strategically. we of and investments excess cash equivalents This enables with billion. in cash approximately a and and to

On XXXX. fiscal the we XXXX. of closed to which payments settle SoHo QX, million related we obligations remaining agreement, Prior our the Flagship $XX Landlord remaining with through to agreement an ladder finalize during roughly in York to Hollister had this QX, we all New store,

accelerate to future a serves a discount $XX cash this all gain our to eliminated of a million, outflow With location. related reduce approximately we to settlement lease $XX in payments, liabilities obligations in and operating by resulting million. cash The received $XXX,XXX agreement resulting the approximately

interest $X avoid As approximately of of rest we a the the XXXX. settlement, will million for of a result incurring total of expense

balance where ways we will ahead, sheet continue to work. for the search the to economics de-leverage Looking

program also During the our repurchasing million approximately buyback $XX quarter, for X.X shares we million. share resumed

X.X As remaining approximately of end our of share the program. QX, million repurchase previously under we had shares authorized

business. committed pending work our we'll to ability market buybacks share the and conditions, are We price excess focus cash to investments to continue and putting to in accelerate on

Taking fiscal XXXX about digital to to half to million, be related with We expect and discuss $XXX technology. our a approximately that omni-channel moment philosophy. CapEx of

meet the line our model, are continue finish formats stores with roughly omni-enabled find in a they where with our the and digital have committed as smaller program continues locations mall to approaching our year landlord We We of are economics. how shop. to restarting better experience future blur. that customers to conversations for location includes the up that off omni-channel serve stores are the partners XXX right and renewal. evolve stores to local in This to have right remodel forward critical year. between the investing we we size, we of our leases right and look customers. As remain the believe thoughtful and remainder that we store up I'll This having delivering part brand more our

ongoing of outlook We to for cost demand realized a manage and will We're providing to we facing DC the last an will planning tightly COVID digital business to sales year. to chase, XXXX losses, off start. Consistent is growth optimize with expenses. driven in progress to inventories put comments work we our uncertainty, the in make are for year recouping and great back full not the capacity quarter, fuel some manage customer areas global position the conservatively Reflecting savings to opportunities. to continue our

will For year. manage gross building maintaining of rate XXXX see tightly to Keeping are in progress. and headwinds mind we the continue inventory for we potentially on cost likely a of to profit with the goal remainder

on For will fund portion a using savings marketing of occupancy investments. manage we fulfillment, focus digital and our and to tightly OpEx, increased

closures from are and one EMEA awaiting on level, For clarity full in fully sales at countries remaining planning an was the which $XXX we XXXX approximately follows. today's reopen. store and as to above do government are We million. levels increase Net not mandated second or expect will be quarter,

at lower to improvements year. elevated on realize should partially cautiously operating and offset to least that digital shortages. and promotion certain reflects of also XX.X% to XX% optimistic marketing basis constraints labor clearance through payroll AUR excluding and from to COVID projects expectation be This the With up to supply expense potential manage ongoing chain activity offset points XXXX spend. we our through million, level by and FX year's Our benefits. by We XXX successfully higher operator, fulfillment non-GAAP last lower drive continue Operating will ability XX% Gross profit remain be higher reversal plan will savings, adjusted we last questions. other that reflecting costs be related up of occupancy ready costs. $XXX are the product and income to for rates

Operator

And Advisory we Instructions] [Operator will Group. begin with Dana Telsey Telsey with

Dana Telsey

nice Good on morning. Congratulations such progress. things. Two

On Abercrombie seeing you. and season Social as of exciting. women's. And Thank for unpack you're then expenses those I've And is elements? terms Scott, planning already very it Will the rage like there. about in are to and each had in How for you expecting as back to can well What olds that denim for men's you excitement X, what or school Hollister just product labor Tourists expense side, you it in XX-year brand? in be are the bigger be? costs? seeing congestion

Fran Horowitz

morning, Good Dana.

groundbreaking influencers with incredible to out partnership. the today also million over for and is social Dixie are Social with the a there excited we So and media opportunity largest is Tourists. us of about it an in truly D’Amelio, mean, two for I Charli partner industry, incredibly followers XXX frankly,

'XX work in with back has started them point with partnership forward. been that that done them back-to-school. And we've the from successful think and that I

of new views video, seen kick company out we've of XX brand their a faster, coming XXXX, now a million coming on just than What brand. out far, off time to better so what XX COVID, thought impressions. stronger, million we smarter So

it as just launched. So know, you

far everybody will year excitement We brand. update of the throughout around on the so excitement. lots the But

about buy Denim when in It's perspective the choices. leg as soon the there a [ph] quickly. It we out ride get Regarding the leading started there and trend. as a out one responding both we perspective. denim shift, And influencers saw are fashion from consumers the ago as shift of to from exciting probably new Denim, year millennial and kids this with within an a the young they were funny TikTok, excited saw today these of as well

both back-to-school So the Hollister that brands, the expenses. Abercrombie, to opportunity. go for we and see we give And across customer call Scott I'll with for millennial denim we to back-to-fall through it believe a for

Scott Lipesky

I will some expenses. Okay. unpack

in the channel supply inflation what they we side. going can AUR to inventories -- and that costs. going to the costs But day and product to on here us of toolkit just line which pick It's first try these commodity prices congestion we have the deliver seen here, more we've transportation Yes. can chain get to see also the is on And every keep also and tool of us much our offset cost. amazing It's our on the product we poor getting cotton importance a pretty to transportation top they every team. doing to to an on business. product, do and product. some in much that is amazing everything inflation force deliver also in AUR cost. some great So, put one, up. There as definitely the so side, expect pretty it mode And we on are to use the enable best there the every do side But in to delays of a at

On the each inflation There's up are some year. labor rates labor labor as always inflation. seeing side, we go with

in certain country. some around seeing shortages markets We the are

center. basis, distribution that store inflation we've Our ongoing seen teams in case-by-case as a are a basis, on the city-by-city the well as managing

store term. And into know, absorb in our made that And thing feel to outlook. can we some can lap. we've it's progress we system we occupancy, the of inflation, something more it's the So is, great booked you with shocks these around the the all near

Dana Telsey

Thank you.

Operator

move will Paul from come with now that to question We'll our Lejuez next Citi.

Kelly Crago

both you're color for first did the Kelly any I'm brands on how brands versus and more just in whether and is Paul. is you for the XQ if in on chance color International. could seeing our Crago acceleration This could question. versus for provide impressive. Obviously, curious provide on the Hi. U.S. And taking you performance trends Thanks trends quarter. any

do Just Europe. of store versus their closure Were A&F store to Hollister's in closing? has there were underperformance curious with

Scott Lipesky

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

the acceleration So thinking about in QX.

XXXX So Won't on work but confidence so brands give QX. the good our performance, great just Have us those continue in was QX. per QX, to that quarter U.S. the stellar. the momentum is here numbers levels, quite se the versus Really back U.S. just we've even came would really into out the smallest say, both may of some really the well as business through in the in good though back target I Europe, here XXXX we up about say seen XX% put have that, company, or above levels, performed We QX. the progress get XXXX around and lumpy. it's in month And when in at QX a brands be given the it's a there is which into this were The started reopened. here. QX. coming all Thinking countries product In that and continues customer to in all because QX very marketing Europe, done to out others wondering for sure that would this year. that I'm coming is thing,

kept on digital, side. countries inventory we results shifted moving some nice that saw were to the those and As closed, digital really

still stores are nice as country still But seen for acceleration pent-up a that we Germany big is there. lacking definitely reopen. appointment have have by demand chunk shop some out And There's clarity. countries only. We us. of a

those read get stores in stay but just we'll react. will Hopefully here open and that'll in nice QX, to it see meantime, the open. be happen So

Kelly Crago

X% margin the term Got it margins target seeing sort your strength could it? seems since of this you Thanks. And margin exceed of the Kind with thinking long and Thanks. about year. this you year? EBIT opportunities, that just curious are

Scott Lipesky

We that target. up to on us margin out pause the top QX. we the there, year the saw expand in remain to the side back QX. line, COVID. And is flow though obviously expense back last target to a last getting and But a inventory Yes. last of that you lost gross get really The through on little committed and what we we control, the expense side of on in -- is controlling X% that which the track. set great side, a to great chunk the business. margins progress And even made year we We for though, enabled great year progress inventory excited about business again thing into can took our there we're with big

So gross are that line margin move we we're get us. that as keep costs of back offsetting those is. can and and coming where that we forward confident to those that levels is up, coming that XXXX AUR some top at it

Not on right year full giving the point, have base QX, a flow track. that. and through cost outlook to have just a we'll deliver hopefully but remain this great at We

Kelly Crago

Thank you.

Operator

with Anderson Susan next B. the question. Riley has

Susan Anderson

then out? back-to-school are that last see no tax year. Are also the benefit then, expecting morning. Good to this to how I'm in Thanks. planning start And to and school credit this off you rolls you July year? back to there. quarter. thinking Nice back-to-school get on you're curious as about sales Nice see cycling virtually job strong of the the year child a kids as

Fran Horowitz

Susan. morning, Good

states more So, we are normalized we're or happen. this obviously of to whether is to But not to year. from waiting on back-to-school still a that lot hear actually forward going looking a

with be place to todate. which what's react working well the to to take and can able disciplines to continuing to and continuing -- our to We're our optimistic we're still weekly team very half. back about happening on those the from last learned year an inventory managing tightly. So is us that read business, the business. amazing react really we for chase we cautiously We We're

Scott Lipesky

Yes. our I'll younger. base. tell a on bit to the on rollout. have we'll grab do see an a side Hopefully, spectrum the the customer younger business. We impact of the child tax of We credit

like value QX, see we feel same business to our that an saw happening and does credit on we'll see the back child hopefully continue is positively that, a number from to tax Hard time. it. stimulus. the impact, roll we out, But that we to if back-to-school Looking at put all and as around

Susan Anderson

year? if kind sounds year, It planning that inventory. that very the Great. about lean could promotional you're the of just Thanks. as environment, still conservatively. around and Should down rational? the be And follow-up if you're talk of you your rest throughout expecting we to very to And go expect we like to remain on the expectations then just also

Fran Horowitz

as going inventory had are as goes, lean I as Yes. I we mean, inventory. far mentioned, plan to

happening and And that proving exciting out grow our our industry. in our is we very learned and the real pivot We margins can it's for there's that demand have supply a that AUR higher get products.

the So We XX chase respond able in the countries we We news produce chain. that being world. very around is with will got Excuse team and an we voice the supply my continue me, to very here. business. be is to best lean. agile can agile The

Sorry.

Scott Lipesky

written part. good. promotion promotional environment grab I'll has the been The

see in have in have to happen exciting, see for that's future. the to play in line a you which across necessary We'll is keeping in going but happens have future. industry, We're make inventory very great what is that going hands, product. the great can You the the to products that sure. still our We're and to

puts line We plan in to and campaigns how us and we're marketing going it, cadence. to have our And our inventory awesome around really there promotional connected. in keep that of question is inventory your that's all first control

Fran Horowitz

that. about Thanks. had just I jump. Sorry to

our that Before thought, next about operator, said Hicks. up you. it's was the some incoming there XX% they Gilly Hicks was was it some before but I XX%. questions question. next confusion I X%, been Gilly up it And Thank question, guess

Operator

the to move now UBS. Sole We'll with from next Jay question

Jay Sole

is guess just Great. margins. Thank I the much. so on question you my

how EBIT year, really, that you seasonally than half to I for higher the think margin EBIT in of of QX. margin close suggests sustainability my we margin is question the guidance will about QX. are curious the the where the And second EBIT mean, I get do guess Just the typically, QX then in half that EBIT in appreciated? year did of store, be Colorado, what store negative Thank what the second Was delivered also Hollister would that -- of that you've half in store? specifically the first profitability the SoHo Scott, the was the profitability was a And about given in the of on that guess, I margin year? the QX. you.

Scott Lipesky

kick I'll SoHo. Yes. off

was back went drag. QX, rent closed that we XXXX. So dark. store. that had that forward. still store a going in We And But stream a store We

put discount. some lease work. able on to sheet to our to balance the off pay nice in excess be We cash to was liability cash it that had so, a full at And

good it's the base, cash and liability to ledger. of the side out flow get So of off that the

As second sustainability, your think that's company along the a about to we talking we're of about to as this to to on variable. EBIT Reduce We're side the three do But brings margins last point. really and for at the what occupancy our expense, reduce our as to point half going years. side, half, trying more outlook. around for much been shift that only the QX focus we've which second continues over expense fixed not digital customer the

with last million versus and negotiations, more margins enable rent operating year of a store XXXX which levels, have big us out XXX closures occupancy we've If so it's taken store forward. should And plus a if. go and to consistent

line keep you margin. If stable gross good can getting and that top keep

out in The that laid there progress on that formula puts that's we're for working we've the that range. QX. outlook and good a QX, us So same with

long we've peers, for all So to our our which investors time. about the closing gap for us some a that's it's owed what of

Jay Sole

Got it.

so Thank much. Okay. you

Operator

has Boss Matt JPMorgan the question. next for

Matt Boss

both And congratulations across the brands. Great. Thanks. improvement on

Fran Horowitz

Matt. Thanks,

Matt Boss

place is do concept? the or merchandising in Maybe you're know speak initiatives just past marketing of opportunity few the that the the look market that balanced brands. how that share where think you Fran, just over differentiate here? And from forward, to that you could about that really to across any with maybe see? I there And topic strength best years both seeing And as you've then, go put your to we and on that way the we

Fran Horowitz

Okay.

start. let's So, take that back to the

strengthened balance seeing that and each super of our to and result And of to of in exciting that we that pretty years the setting is paths. brands hard brands is have of genders. own lot The really their it a across is we're businesses today it all our of work point your in see So, exciting. a on

win. Women's We that So resonating, and happening industry particularly which modern the experiences. like appealing say version about where their lifestyle. is is true is to complete responding XX-hour are millennial the from collection, She that brand Business we our see young just The to just it's come with It's cozy, stay just of really voice resonating in business. more a coupled those and when dresses Abercrombie everything which we fantastic, new a what's home a terrific. it's standout. at together, and That things to the have with to

also getting to to she's out. ready So go

again, to So resonating of are assortment. business lifestyle. candidly product, girls girls coming Hollister, appealing as providing each we're with and experience a And her her it's and In well nice happening. business has boys dress part both voice balanced a together, the

and brands denim. has So she's things world And both strong, to within exciting happening obviously been all out across ready the getting Denim go again. see denim. and genders across that are of lots

Scott Lipesky

to other the ceded we've retailers. XXXX, market think to like second that. and we it within But We ceded sales industry apparel share. where brands. do in we've margin across feel a Let experiences technology market When also the the you share part on me things back back grab industry like have outside and our opportunity we here peaked in to

share an and grab have grab The do amazing we message. awesome share. opportunity go So, product delivering marketing to about is

We feel that built the a muscle of we're is from we are perspective, very how marketing have the about innovative recent great past of our a each of all over doing brands social couple more on brands, years. our media, And social things example of tourist that. positioned marketing just

share. If that formula. the product, go and we So it, of can right deliver experience we combination is the voice get we can think

Matt Boss

luck. hear. to of Best Great

Fran Horowitz

you. Thank

Operator

next the Janine question. Stichter has Jefferies with

Janine Stichter

if the year? plans. Hi, this morning maybe you're the marketing. It Want definitely to a progress. earning wondering about there's a And the little seems congrats way any bit about like the on good I'm talk to spend there. return higher and ask spend bit on quantify

also be it's hit channel. lot of if costs get color consider Sounds like-for-like ask want Wondering Thank not, And from or these that's towards is like brand a would may as to on all product. materials And but digital, the coming obviously some any by to going just we AUR very start then if about of raw strong. in? something at pricing. up you if you've you. more taken price

Fran Horowitz

to to going We're Yes. I'm with pricing. going the one backwards, start that Janine. start

pricing product is years our able what exciting seeing there. with less of and What's being comfortable reduce to that that's to very all discount actually promotional. out talked about being our our across brands. are what really ticket we're We for is we've And

very the pricing, and So to that we're -- lot able reduce our promotions. of ticket happy with again, we've to we're a pleased been see

Scott Lipesky

marketing. to Back This the is investment of for company. an area the

into last their above also I teams, built marketing just great year direct very the last marketing in and Like have above each brand dialed they're and to customer. is We how we XXXX. be one, mentioned will

going So as we think culture we're about spending forward, -- plans of learn here. kind test and we're

with opportunities And marketing different seen marketing. more test fuel to that digital channels returns we're across excited the spectrum digital different about to the we've platforms. going continue growth and continue across top We line and channel, to we're

Janine Stichter

Thanks Great. very much.

Operator

Mark from question We now will Baird. a take with Altschwager

Sarah Goldberg

Two Goldberg questions for of new incrementality are the there thinking of the given been tourists offering social Hollister? there. any behind then, the This in level you are is on margins current Hi, brand of the differences about the or overall collaboration engagement gross great structure. high our good Thanks How be And of should Mark. profitability? morning. at Sarah taking It's terms this versus question. We mindful see to for launch.

Fran Horowitz

a for a have in here pyramid. to last a look -- lot we the We Yes. year, tend and Dixie the exciting -- Charli tend partner way at creating saw forward. tourists girls that about we trend base the we us. a saw as Hollister them the early talk to What social mean, we for new is started I customer They with bring really Halo more brand. to

of So pyramid top they're and little more than today. advanced bit our bit more the a customers little a

new can doing apply be be little to bit a trends on. brands. earlier will showing they that and will what it of Hollister lot a information So then take our We

learned close lot So with a we move are girls are they've tourists, us, we've social look these a as learned and to forward. lot consumer, to as to lots how with this that's going Z from And angles at very there's from we're working continue we, exciting Gen of them.

Scott Lipesky

the a to here gross when consistent margins, we operating other cost continue the there'll side And startup On from be about margins brands. the of ramp this as bit zero financial think we the it, a year. up that relatively with of

be other it'll Fran -- should a less benefit. a But halo that brands the margin we like good Hollister there'll to be of the brands. So, be mentioned, around operating just the generator than expect see

Sarah Goldberg

you. Thank Great.

Operator

Research Associates JJK has with Kloppenburg Janet next And the question.

Janet Kloppenburg

Hi, everybody. got bit improvement. I Congratulations on the little late, Scott. strong a

take plan. could be you place lastly how what that me. for missions? with I margin also, go us forward, may you gains margins that digital But was month spin-off maybe about So And look much about on by to thought on price your place full-price can how Gilly, in and do the could on traffic And given there like concept? month that there? increases associated and Thank is some resonating? What talk your that just selling you. forgive levels. you're change And if strong view some the we as wondering seeing a product And of puts

Scott Lipesky

open, All the of negative, what barely but store faster month, some remains as say traffic back going what store know, reopening since look were at is. it is not slowly, get you obviously positive versus beginning, places. to we The levels to XXXX, right. But economy's details kind start I is The in traffic would into I’ll that XXXX, yes. month. by and they by it

a our of and gains. fine. digital U.S. response Does very the change not that's pretty Europe. And on all at scattered a view across see You much

digital customers the of younger Our group. the a age first side They're mindset. on

digital, So everything the it it and sometimes starts ends online. in ends sometimes and stores

So change there. no

As margins. think we about

expense continues to less has formula been store need there. pay shift the us, customer they're to For not as have rent the and we if less online,

of out that's that lot QX. We So done that had play the saw we in work year. here last a

about thinking our in change that no term, longer balance. So

Fran Horowitz

the prices selling -- regarding full-price taking was up. question And and I think

our to really mentioned about more and right inventory manage excited two acceptance speaks not opportunity consumer. much as key that we tighter selling, our product than The from things. getting regarding past. in we've So, full-price -- ever then product be really to the this the and we're could we had It

So, discounted do working and our is really not quite What raise been to prices. trying something time. reduce our and has we currently promotions for to been our that to and some looking are ticket been to able we've on we've get

to exciting So realize it's been that.

Scott Lipesky

expansion, margins Gilly great. the assortment. have good. is up, with spin-off the piece, margins expanding we've We've last concept. improving, A that within We're which as nice great way And on resources that think which thinking team inventory built from seen been And putting Gilly a They're assortment about come Hicks, Hicks. And vehicle. in behind the that the it about. side growth a as we this talked assortment not well and a people at We just we're marketing like point. it's is from

vehicle and So we growth look the at that a that we'll for it company, as focus way. on

Janet Kloppenburg

much. so you Thank luck. Best of

Fran Horowitz

Janet. Thanks,

Operator

now from hear Marni we'll And Retail Tracker. with Shapiro

Marni Shapiro

follow-up maybe really it’s the it before that? stores, your especially categories could point, a a in little have have ago. guys, of mind. on product your parts the pretty also product maybe time I guys have period improved The wouldn’t Since has through a where the if if had could of the selling at But stores shift and absolutely little you always think you consistent Europe, quarter? less questions, fantastic. across a seen everybody. some Abercrombie, bit couple been And first the a quality. while restrictions got And bit even you at some touch type with. quality? product been at across a or Dixie a Hey, so congratulations, country looked a Sorry Abercrombie Charli with Tourist the that to talk products then, brand consider good about opportunity that you for Social Is just eased was of or time bit that? obsessed you an in and in of You which like many. somebody on an partner of influencer there and are There all little They’re short ones. would I'm have have I quick commentary, the

Fran Horowitz

okay. That’s

question shift in back seen interesting. the product. it’s Let have Yes, me the go regarding a to we first

throughout an and seen dress acceleration with business have We dress the incredible our strong a both business across brands. of throughout shutdowns. said, we that saw But XXXX Marni,

you on staying really, have their to he seen focused and lifestyle. shift, as a a need close we balance. There’s And as So and still consumer home. team is they to up are understanding fully still in can our from what as know, we but work some she

was on I to it’s get is would both I for of the their they’re has the part The got -- of quality, took that’s -- that dresses. starting Abercrombie on was out. had But your one Now focus say, Thank here, brands. very initiatives Hollister both stronger biggest quality. shift first lost first which the you It for even When brand on had our legacy comments inherently now brands, been and probably our DNA. your true on. strong, and and I really

putting out that product value The that the are to for And provide media on terrific. we’re We is in it hearing realizing we and they are the and he all social are that much commitment. equation absolutely there we back our how it. from she that consumer time

you thank for So, that.

actually partnerships we question partnerships. third all have your brands. terrific Currently, on we Regarding partnerships, our across of have

introducing As a vehicle. an sell lot our work of new lot to of with through affiliates product brand women’s. channels. We example, consumers a on our social They’re that Abercrombie that in

we the it social with social that and something real commerce. opportunity commerce -- talk to we’re what our all here is So, it industry-leading time about goes doing

Marni Shapiro

is doing consider the things them more or you and affiliate like of Would a just any that? product launch with marketing it

Fran Horowitz

them And at point, Yeah. of what’s this for as with kind the us moment. At affiliates. that’s our is working working focus

Marni Shapiro

much, Fantastic. guys. Thanks so

Fran Horowitz

you. Thank Sure.

Operator

Carden [Operator will Blair. William with hear Instructions] now from We Dylan

Dylan Carden

print. or footprint, some you. retail curious this I ahead of early and -- for it acknowledge this culmination a I bit efforts those just kind you just But Thank have highlighting little been here the of the of on that the appreciate Awesome. guys curve you’re was might be there question. of on

to forward, two how just about appreciated made and about link Thanks. closures lot up a now give sort take of any provide -- go commentary can you’ve would just there? channels be of that the efforts you’re between them any of appreciate Just you comments feeling kind

Fran Horowitz

early. think, it is I Dylan,

that footage base. excited about really XXXX, square and make able out progress in taking the very unproductive were renewal XXX-plus closing are this XX% noted, We store fluid We of very We still Those as up of our couple an we haven’t to have additional an you for year. keep a candidly opportunity. our We leases started negotiations next yet stack. of years. for keep over the lease stores

the year and So, as those of our landlord, we at into that start we’ll with report the have head point. back negotiations more we half to

Scott Lipesky

Yes.

Just to add on little bit. a

As store those really a the in broadly stores. our catchment many at network the how should about size what the how we how we with plays omni-channel that’s really be. a or drive omni-channel supporting stores shrinking particular to certain it’s business been think total in look more digital, market. We’ve a experience stores about and need you city it, And

to have need for You’ve oversized. been are that. do years. We continue that We to stores on this still journey with some us

it’s we omni-channel take So within market. experience out but really when thin still an footage, that supporting have brand step you each a square opportunity to about back, that

Dylan Carden

guys. Nice Make sense. Thanks work.

Fran Horowitz

Thank you.

Operator

for And this conclude will with answer additional your gentlemen, turn that, session remarks. today. closing to for Horowitz any or the call question will I Fran ladies back and and

Fran Horowitz

Thanks.

you I our call we hope you, August results. second I our everyone, your speaking summer. look report today. enjoy thank for So, when you to all quarter participating forward with in in

Operator

conclude disconnect. conference. for we you participation. Thank And that, today's you will With may your now

Abercrombie & Fitch (ANF) 26 May 212021 Q1 Earnings call transcript