Earnings call transcript Q3 2022

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Operator

Good day, and welcome to the Abercrombie & Fitch Third Quarter of Fiscal Year 2022 Earnings Call. This conference is being recorded. At this time, I'd like to hand the call over to Kate Wagner. Please go ahead, ma'am.

Kate Wagner

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

morning, are today investor Chief Chief this our third website on Investors available me an under Also which Fran earnings Financial issued release quarter the Earlier at Lipesky, Joining is on Scott available call Horowitz, on presentation. is website our and Executive Officer. the corporate.abercrombie.com we section. Officer; our

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

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

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

turn call I will the that, over to With Fran.

Fran Horowitz

Good joining thank you today. and us morning, for

coming and QX basis results XXX XX% sales with showing Hollister beat our navigate resiliency our Against operating like in we for goals ongoing Before up our executing our than expectations sales backdrop, our and sequential challenging margin long-term the a on we to and global focus I'd thank as the dynamic line their top global and points Abercrombie's on bottom expectation. environment. improvement, team dive to higher in, adjusted macroeconomic

we've with from peak our and throughout in encouraged the beyond. the to Abercrombie will momentum us a holiday the cut last quarter. steps position season, I'm in and year in taken of half We're continued our excited about into win change going trajectory and inventory the healthy QX is year-over-year our confident put at I'm business by the position the

sales their across against Throughout significant second pillars to of on outlined were key consumer the Day. our currency day-to-day results, improve XXXX Investor pleased continue while execute flat inflation Onto continued to see global our constant our delivering to the lives, a QX on see we business we in quarter, quarter, basis.

and These us growth, across our season financial and an which our enterprise-wide pillars to with will healthy momentum operating that give the with discipline. approach key us confidence inventory initiatives, digital in Focused evolution engaging is we merchandising in enter with a consumer levels, brand channels. holiday

bifurcation significantly Brand saw brands improve as Hollister with the the Growth, and gross third to margin continued performance outperform we trends sales of across continue Abercrombie compared Starting sales to Focused QX. quarter. in

as quarter, flat For declined mentioned X% on net XXXX, were and the third a sales total I to constant-currency company we basis.

Kids, includes by constant-currency on strength we Abercrombie which led brands, adults. or net in grew basis, saw sales XX% a XX% third Abercrombie For quarter ongoing

quarter were third even Abercrombie reduced level XX% brands have XX%. pre-pandemic sales around Importantly, store of XXXX, up as footage for by over square the compared to we

customer quarter, third momentum we Abercrombie transition our the to adults as During continued fall. saw

office the as to continue from Happy and to to we aspire our open a evolve customer Our to assortments Hour gym beyond.

some product versus AORs QX in see of its and so team proud in strong sales in XXXX. on our since industry. am sales XXXX, strongest marketing AOR results to track to and request QX and to XXXX, the growth continue channels best our its highest boundaries Adults push With I achieve [indiscernible] this deliver

the our best franchise driven Best by of strong, The chasing our bottoms strength Dressed and performance product, our across to ever the since very QX in delivering remains On we jeans, levels Guest dresses continue sales pants, trends was QX categories. women's and sales highest as XXXX. key assortment build

outerwear. across shoots some seeing key QX strength growth saw well with QX, as we green in as in demand after top And categories

are overall the and that positioned about emerging in early women's, holiday of women, are we will the Across XXXX. and deliver trends ahead. size about well lags men's for are of growth we men's energized opportunity optimistic spring While we

team be of to the front, recognized world's deliver. were continues Marketing marketing by is thrilled Strategy largest Commerce Performance to platform. We with the Year which LTK, our Creator On the Award

The [indiscernible] our communicating through projects to all our partnerships. our for passion Trevor successful Abercrombie work leading team brand the their named value of all in Fund by the work a list our Brands to the and was for conversation inspiring Steve around for ensuring with also project, their that -- company all with the communities. effectively Matter SaaS purpose, to these and Kudos and work hard

abercrombie to kids. on Moving

As improvement as quarter, but super in sequential the quarter. a the had saw sweatshirt soft best kids discussed to we season, and start performance we our saw back-to-school last through soft We sweatpants. move the

includes and improved Turning trends saw to selling slightly to Tourist. Hollister, We which Gilly Hicks Social QX. compared

with Consistent customer lingering significant to quarter check basket we stimulus last the but Third XX% this closely deals saw of X% as declined in a and effects traffic store compared QX, constant year. we lower inflation on conversion year sales the apparel lap size currency U.S. XXXX we with basis. to or our

spend we top October, of bottoms to As compared period XXXX. through work and into customers the back-to-school we and continue see remaining shift as to towards our September out

dresses few and of performance at stronger looking conversion higher We in We're like items categories fashion improve as past the woven ability categories occasion have our women's these chased into are shirts. men's to related leading pleased and months. in to special see indicators

seeing performance categories. in spread business We to women's to work other our are success nice and tops will the

second improve apparel key From continue inward an look towards we softness merchandising [indiscernible] to the to in made Hollister, we perspective, the personnel at of season, seen the our team. end quarter, organizational opportunities key levels of at a the business. in back-to-school space Hollister senior has several the while moves

amazing has to a forward Kerry built team building who she has also Kerry and instrumental the into marketing over where Chief a years. brands. marketing the and have and Marketing past Hollister Hollister A&F past Officer work been responsible marketing for of turnaround. four our of role ownership our Abercrombie Krug, strategy great is done seeing We new years shifted We moved creative Kerry in to driving the now as the team for few all has across is has look Head

continuing perspective, terms with inventory operational forward level we which an and in From discussed, total actions are of plans the includes by adjusting category. receipt

awareness stores. At are brand, active Hicks, to With determined step we these we the to Gilly lifestyle freestanding opening adjustments, took around quarters forward a improve in we the performance to Hollister's as build additional continue big come. in

freestanding excited updated to XX I global in test as customer product positioning offering team are bring and have with to The we As XX in and and three we and our of Gilly stores today, to the EMEA. our continue learn. U.S.

our around full growth principle a the we few It's across brands. net will support first us XX in past see decade. been store updated to We continue new the than we to to Gilly, make brands our exited store opener years. the with reenter centers track for opened deliver XX experience more for stores towards of over continued as openings great time and our brand new key locations in the as a year, quarter opening in Outside the which well

year, Hicks three we Hollister's, the XX and stores. XX kids adults, Gilly expect For Abercrombie to XX open

that has higher dedicated categories fitting Styled fixtures customizable are to space last Abercrombie new the our features Abercrombie adult per square updated average store. the and our elevated lighting. compared adult, rooms and is new foot delivering customer well store key merchandising to Financially, Abercrombie For responded XX% furnishings. quarter stores with concept to near sales

right welcoming out rolling start to excited and concept Revolve remain is in format the adaptable, all are that new acquired interior our real shopping environment brands, allowing new size, flexibility. The economics. the checking complements box: The quarter. we right agile we The be digital stores optimistic Hollister, disciplined and with concept an our estate designed merchandising to and our experience. For omni-focused this and location is right store each Across open for approach creates the

to planned Shifting inventory after XXXX playing in year-over-year XX% as moderating QX good is We inventory inventory up and selling we in as through quarter to ended growth back-to-school peak Hollister. the at a inventory. QX. progress summer with inventory with made The out trend

and inventory haven't items. defined that XX% quarter, Consistent fall goods new with product, of set longer-life last our for holiday been was current,

through the late anniversary growth to further, flat moderate to we experienced relatively are As we and we as we we be planning year. inventory fully QX, year-end receipts expect year-over-year to move last XXXX by

Turning second to our strategic digital principle, revolution. enterprise-wide

delivered completely developed we whom to During pay Shared pay, we've the and accelerate months share customers a team our quarter, past XX proud I'm on of revolution. hired was internal Hollister Pay we add our over of mobile to so way the as the talent to many in-house, digital for app. new

team shopping our barrier with parent. The eliminate our to customer its saw based Hollister of on barrier, is first we allows kind bag a This to need among the share solution easily a payment conversion. their digital feature customer their key to

For example, access purchase transact to credit as the many don't complete cards to digitally. to have

share has with of as technology conversion The more are digital business evolution, $X.X cases beyond support Hollister. grow our example which roughly doing billion. our of than evolve the early been finding response is and base basket work average. We'll to to our off XXXX the necessary get continue pay one to digital teams higher use This the and is feature transactions positive to size of this showing feedback goal a

in also our we areas on in thanks multiyear merchandising rolling future. I and will to us huge data, A modernization out next. addition what's see made the enable like smarter wait team, In and to can't technology efforts to technology, which progress and faster be customer-facing to

focused adjusted financial demand third in For discipline, to currently with patterns. we match better quarter. strategic We on operating expenses and headcount are manage our third managing principle, controllable marketing the

forward a buys in ensure with last are strong all performing to align and brands and for position to reduced to categories. holiday we discussed quarter, in go As better sales chase trends inventory receipts

cold with and our optimistic our for on backdrop, chain our holiday different I cautiously to in inventory efforts last mitigate Also macro than we early challenging this due Quarter-to-date, the good weather QX the potential customers in remain have much we've categories. we earlier way to than delays. weekend. season are deliver seen normal sales to reads a consistent with up year supply inventory Across this brands, Despite year, ramps am big hand the assortments, running pleased levels. as

the on also laser-focused deliver a long While our teams term. working are we holiday, great remain to

As strong execute investments QX we to and we our our XXXX, multiyear the in balance expect continue to plan. Always fund to sheet Forward move to through necessary strategic leverage

turn more it that, to with quarter outlook. the and updated Scott going to provide And over I'm to on our details

Scott Lipesky

good and Thanks, morning. Fran,

to impact quarter, flat currency foreign were saw on pressure million, Sales as and down approximately point year on an For both expectations net delivered sales. quarter, basis last the sequentially Hollister. reported we in basis. Abercrombie a accelerate we a XXX of saw trends driving basis We to currency adverse X% third our sales results and above $XXX at improve constant the

and X% to respectively, at and for kids, on sales Hollister currency compares includes declined XX% rose reported basis. Hollister, Net declines X%, of to includes growth which This currency which of to and XX% and currency compared constant constant for QX. XXXX a basis a basis. XX% X% in on in Gilly and QX. XX% Abercrombie currency reported This on a Abercrombie, respectively, constant Hicks Social reported XX%, or Tourist, compares and constant

was our once softness currency net region, region, reported currency we in a are a other basis, and basis XX% declined U.K. again there performance constant and reported increased XX% U.S. constant Obviously, and basis APAC XX% winter. continue internationally the in Middle a and on key sales many Europe. constant on down was EMEA, unknowns basis. EMEA strongest X% on countries and XX% the in and or on to In By a on in By currency basis. this Europe East, XX% Western see down a in was X%

our inventory the quickly So and to reacting controlling and our focus expenses is environment. on

China, In but negative trend remained significantly our from QX. improved

On adverse XX compared a of than inventory. last constant of slightly basis through last year up product higher profit gross Abercrombie year-over-year currency and and rate basis year Key XXX exchange back-to-school was basis, drivers was XX.X% costs than with AUR points Our of change year. impact XX.X% the to points. Hollister as we higher lower last rates were of the work

product optimistic recent costs, in are freight we prices stick. cotton pullback the On will and

ocean usage a we to QX closures see rates last freight and to anniversary lower year expect in of to air sold. elevated Vietnam and in tailwind cost rates We as goods air due to start materialize see flip

quarter. cotton, see the pressure will For continue we year-over-year to cost in fourth

back lower in Looking half of the a ahead, to assuming hold, starting XXXX. current we prices expect benefit see from cotton

with inventory current. quarter inventory. ended XX% of Moving We up XX% was to on which to the last year,

back-to-school a progress During Hollister that the higher quarter, we bought trends. made was through than level at inventory good clearing

have to and back-to-school inventory we trends categories hold match inventory Looking to the reflect key that and set been box receipts Hollister spring, beyond, and and this chase and to in QX coming for summer continue reduced to Abercrombie. will

in More recently, an to supply in coming better expectations. we stability greater are the year seen relatively have In year-end. by chain flat we transit level inventory than with targeting total, our times last

last the foreign excluding currency. of now QX expense, The inflation non-GAAP driven on $X million for $X increase rest our mostly year. was $XXX I'll higher incentive-based by million marketing, operating other QX last results respectively. expense, compared adjusted offset lower was We million impairment income, year, operating fulfillment this an $XXX digital and of and to by compensation in excluded asset cover million year and pretax basis. charges

income year. approximately in impacted foreign $X.XX impacted last Changes operating diluted compared was by EPS of adversely $XX million to approximately per million in adversely net million. diluted Net Changes to Operating currency share by income $X.XX. of year. operating approximately $X.XX income was income currency last foreign share per compared income $XX $X

sheet. to on cash of liquidity the million million. $XXX of Moving balance with and We ended quarter $XXX the

to liquidity and cash during the holiday expect as We sell we inventory QX nicely build period. in through

our repurchase for remaining we XX% At $X share of approximately XXX,XXX with the shares the program. authorized XX we outstanding, million During million down quarter $XXX repurchased start shares end, quarter, XXXX had from around under approximately previously million.

business. of million a remain value. cash at excess to $X to We work, discount notes market ability also in levels, to accelerate pending slight secured the putting repurchased liquidity par our senior to We and committed conditions investments

be we CapEx we million, Turning maintenance. capital as XXXX and approximately up total, expect of our of we half spend expect investments. technology to $XXX In technology outlook digital half to for for certain to investments, accelerate our slightly and and fiscal stores previous

stores net store year are in expect with to XX U.S. We XX approximately in to a QX the majority new and through to the with set XX continue stores globally QX. be opener remaining opened this open the We

approximately with We leases close year-end, partners. to expect up we to have for XX by continue negotiations pending landlord and XXX approximately our stores renewal the

As to Abercrombie brand U.S. outperforming be we look pressure QX, and and regional of on performance assume will that our international. the consistent year, consumer inflation-related relatively remainder and we outperforming the with with demand continues Hollister

year updated guidance. replaces outlook Our previous full all

prior up reflecting of of range of points X% the approximately Operating QX. to full year, down follows: the as will X%, of adverse we worse X% an to estimated an impact than of to are previous margin expectation. outlook level net Embedded our sales approximately currency, from For basis down $X.X foreign planning results mid-single end our lower outlook in slightly in this previous the slightly be from X%, to with increase X% XXX X% range to is digits. in XXXX our billion, better-than-expected

expect XXXX. million product continue to $XXX total a We across operating and costs costs around compared to inflationary impact

sales the quarter, fourth net to $X.XX is the level X% X% are as of XXX planning trends. Embedded outlook be billion, approximately will QX we in currency. impact approximately consistent of adverse an foreign For basis XXXX from estimated points down to this with follows:

the margin, effective earnings For rate and to expect as by high to in an levels XXs X% rate the X%, we and a mid- tax between operating sensitive level geography. remains

and holiday we digital an omnichannel experience the evolve eye the season, across our years next term. This brands. through we year manage accelerate long we on as our pivotal As are also keeping and are revolution

inventory key the goal investments. tightly flow expenses of environment to a with managing fund cash and We and to mindful maximize are macroeconomic are

while and we'll optimistic closely key XXXX, remain to monitoring on product expense that significant other cautiously demand, across stabilization we consumer we see Looking relief inflation are costs some of categories.

more in We come, our earnings months assumptions will XXXX a and lot for on we'll learn the QX to call. discuss

operator, that, we questions. for With are ready

Operator

Advisory Group. Dana ahead. from from first Telsey go Instructions] comes question Our Telsey [Operator Please

open. is line Your

Dana Telsey

trends into half? go then other morning. the Thank you to hearing the -- people given enhancements comments about that in this the have product it any forward to and 'XX been current in into your half brand on you October cost occurred -- the lastly, and quarter? the Can been November, there? how opportunities. you chain Hollister see quarter How the on second to into we've exiting mentioned expand expect supply how Nice have Scott, And the first that And Good then making you've you do you. been the see compared unfold with progress changes to and of progress. about

Fran Horowitz

Hi Dana, good morning.

QX to the mentioned, you from improvement QX. pleased sequential were see as So to we

to In fact, our both see pleased were brands. it in of we

take as But control. QX, The do the as controlling at on impacted Hollister inflation off has see we as of to soon kicked we've opportunities those you We we consumer talked of Abercrombie at we us more end moment. to customer, last a definitely as the be back-to-school the step are the back, If can our some leadership seems been recently, the than changes came about by hit changes. the got started towards what inventory quarter. end

It's is those. chased see very tops strong. exciting our to We business into

perhaps their putting to there year, can't they couple they of but jeans new buy this we is the outputs story pairs tops want look Our so those. to they're consumer of with talk a when that new,

come, inventories that We team in and the are improvements the working adjusting working. continue leaning hard really are and is into determined very these categories quarters to to to on see

October two, see Let's into question ahead. November. Go

Scott Lipesky

one. that grab I'll

those and maybe It been what softness seeing A bit into the industry. warm sounds is little which across exciting. optimal for cold selling the like others, and there, improve since And first obviously, products. October, pervasive like seen was So not Super industry. across Northeast. in of the it Midwest the I similar trends than weather have that's trends of week November. late we've there

early sweaters, outerwear seeing our to we selling are where We places need through win good weather and in categories cold fleece, QX.

So happy in those results with there, results the the categories.

product back and The it's the in, significant significantly see here On down to longer look year. opportunities cost cotton to seeing flow and year-over-year. reductions freight look great as that as thing prices going little stabilize cotton through bit as through next coming to -- through. pretty air well these Obviously, see a costs ocean take in we to the

year, next that half then in So year, cotton those we'll the first the Optimistic next they year. where of the entire pressure, see and assuming the will be start benefits benefit of see half to stay are. second we'll ocean freight costs throughout

good coming, news So cost hopefully, the front. on product

Dana Telsey

Thank you.

Operator

Thank you.

Our ahead. from from Corey Tarlowe comes next Please go question Jefferies.

Corey Tarlowe

and morning, here. questions. thanks Good congrats the right. And All on taking progress my for

and bit start into So Fran, maybe the and the could little if lot about It they're you feel inventory of like holiday. the of look good. really is talking a current, all to you about the the inventory health going just how sounds they seem stores, a

So little assortment maybe talk the And holiday here. the inventory just then the a into health I a of follow-up. and bit have the about

Fran Horowitz

Good on pull has of it inventory, was kicked quarter been we year. set the to strategy forward this a And saying up it on and talking the we our every reading by the inventory, important off most topic get ourselves year. hot which a morning, and about really we've quarter, for Corey. had year been Yes, that it been we've

supply with both and as our closures our with a we again. were lot going were product chain we struggling as Vietnam not to year, of disappoint issues, last customers in So well

of It's point, were as we we able script, lot where the inventory get a to current. mentioned in which to But quarter. So see the your did respond to of current. is inventory We start I XX% of second our in adjusting our product last my is what were half that to consumer we XX%, about to quarter.

we we and flat our of by said on end which where So as had we're are category by pleased at is we said the and strategy. will be the currently brand what year, -- by

follow-up. I think said you you had a

Corey Tarlowe

talk puts just have expected bridge takes how you talk of then, just seems to It is you environment about about about guide? margin, for about the how are head maybe holiday? that. that Yes, think promotional like we into the Could more could promotions see been that X% you operating maybe and people baked associated are into with some that talking And ahead. that X% as how the the QX Scott, to you

Fran Horowitz

Sure.

is of the So big we're into quarter. a -- heading this week

I think the quarter most of knows promotional everybody it's year. the

working where where to Our weather for some promotional strategy, to very relative to less times, promotions that nice based is is proud are were We're I'm us, out on many some selling pre-pandemic some were than what our as we and we from what not retailers and cold stated say isn't we've that already other is happening there. considerably last are categories year. flat seeing categories. and

are positioned this looking I'm seeing So in out all to malls being personally the weekend. and energy compete, to we that forward and consumer

Scott Lipesky

think down as inventory. on that push we period. earlier year trend to that see of QX As will that the up to Again, in in promo there time we was in expect was bought about we Hollister we continue we environment -- They bridging kind that that kind operating the down were nicely to up in of again. fell back-to-school June before and Abercrombie see inventory margin, that AURs QX

to through in expect little play clearance, that through we thing Abercrombie bit that the as we to down So a same continue QX, up, carryover see clearance. Hollister AUR push

last X% think be we is whenever as think XXXX it levels. I to the the we gross will year, about As getting to below started margin, thing we'll bridging pressure operating see still way we're year-over-year. there X% so come margin see the is in, closer still to about really freight some And good the

in will fully flows that and the P&L most of as nice into a QX, absorb comes being that tailwind While we see freight cotton through.

in else them And we AUC. We keep other AUR. talked want not operating costs, to much other then the On about year. flat last happening relatively costs, to

year-end costs Fran flat And excited seeing to And through last seeing said, that XXXX. what it's into inventory the year XXXX. throughout year-over-year, product going and So a really story, hopefully environment. be we'll earlier, first to we're move benefit from as at that about again, cleanly the to be and promo work question really so QX, and margin targeting for we're

Corey Tarlowe

Thanks Great. best And helpful. so Very of much. luck.

Fran Horowitz

Thank you.

Operator

go Citi. from Please Lejuez Paul ahead.

Kelly Crago

Kelly is this on for Crago Hi, Paul.

a wanted follow standpoint. So to sort what I up promotional from of, seeing on, just you're

guess promotional that up AURs was the what brand you're that & Hollister So guess is side, And also XXXX. assume XXXX, higher year-over-year. more saying the would those I curious, less to like? promotional AURs I'm on look driving or I I -- AURs the And relative those just are was then other A&F relative then to year-over-year, which is than

Scott Lipesky

go me Let Yes, on one. this

Fran Horowitz

on the Clarifying point. first

Scott Lipesky

on when more we're Yes, about Hollister, we the point, first not talk promotional. so

will Our last might clean we this for promotions Black where that additional to started, promotion year will just continue up year, see last consistent inventory. which be pricing or carryover some Friday is promotions year that has versus be actions to good. to

on bit So a constant currency little will down basis. that's we're AURs be assuming a where

FX a QX. have We continued do as and here sadly hurt in

just the hurt to currency basis. on going a that's So AUR

As we like we think AURs are, actually, about XXXX, they're across the where brands. up it's --

move and where Hollister in fully I'm nicely XXXX a had Those sorry, So than of promotions higher that up XXXX are more evolved kind inventory. even for pre-pandemic, we AURs back-to-school -- as assortment. brand or and we still that put on Abercrombie QX, that to

going coming more gross forward. in And across getting see back recently. the light for cost in then that So that's that margin do to loving in to a brands, we're we've of even back had Hollister AURs good go direction seeing what to

been And we've as promotional about A&F much sorry, that on we've -- talking just less through, been year-over-year, going A&F brand.

And Here there both amazing. and frequency. promotions, pull to been been the off momentum just has seen we've able that we've depth

Kelly Crago

around then And it. Got comments trends. the quarter-to-date your on secondly just

I we of closer you're in bit improving X% I'm guess October, have the net so stabilized, holiday. down is a maybe but see little X% to And kind get of So that curious, just did you XQ. to consistent to as pretty with trends saying a slowdown

issue then holiday was There on year. think the we in seeing demand we pull just was you're curious maybe some some last as that of what pull quarter. through was And the the So kind year. of -- there an of kind is quarter-to-date? move Omicron forward comparisons last

So of a just curious looks the how basis. the on quarter year-over-year rest

Fran Horowitz

back that one. We'll start with

is our So this expectation, interestingly, pre-pandemic. probably mirror yes, I that holiday for more it mean, would

Black that, year see and more spikes saw on from to demand which Friday big week Black traffic through the you bit this some Friday the most before, and year the holidays. would last So the Giving used Prior to a these we of Saturdays. be little key Tuesday then of flattening throughout a days, through

to more So little a bit pre-pandemic. we of expecting are a cadence similar

Scott Lipesky

you Yes, QX. trends kicked Kelly, like quarter-to-date off with consistent with

the So I feel tough couple in same small good a thing where we weeks November quarter, end. little one. a October, of in are weeks the These are. Yes, with at there week

cold So mentioned earlier. I back on track. those weather Once in the weather turned, we selling saw some categories great

had as And quarter, inventory So we feel here through we year. today. light the last go sitting good

year, to quarter. inventory go excited We this we compete have we're the as light and through

Kelly Crago

Thank you. Okay.

Operator

Please Casella, go Carla ahead. JPMorgan.

Your line is open.

Carla Casella

in those take you'll you your Well, or capital the structure? a of about point bought $X open would and you bonds you in I your in just the whether bonds, calling what consider market. What's back ask -- to wanted look million terms of structure at thought the at quarter

Scott Lipesky

Hi Carla, about yes, bought million back some $XX year. had done the in last quarter, middle of million. We bonds $X

the Bought bit for in of back. this million stock million, continuing business. little So a We've $XXX back invest allocation excess we We back to so as taken from bought $XXX cash, increased capital to at capital the the them bonds year and stack. look we have investments.

trades holding. expense, see and of we interest can opportunities like of cash go a going more debt debt little buy back When that we bit that think about our in where market, recently open When forward. the the little we're capital comfortable we're we a payback have holding the par, there we save structure, seen in bit below nice

to big though, the cash, debt. that put cash where with So as stack at we'll picture, And we allocation see look capital work. the and to we comfortable have excess continue

Carla Casella

shipping they year? the now you peaked then just And to I kind Can question and where freight them and great. the and in they where could on be quarter costs. to where next talk do about of relative Okay, if are more you next rates just one expect

Scott Lipesky

Yes. the shift the in say all point The tough indices from happened from countries pin multiple this are Coast, to and we would peaks, down. you place. I somewhere when Asia. ship shipping don't China maybe probably to just in the year, earlier index Southeast over There's But West costs

is But the So can grab. say they're index there's pretty from one just what peak. I would no that I down significantly

seeing there, demand the summer. a receipts earlier we're back fell pulled the environment this retailers, that lot including with us, out And businesses off QX whenever on of

demand environment that's favor the and the the back is beyond. good. that retailers. stick of in optimistic and that seeing QX We're will pricing the that, in Hopefully, come So in tilted

Operator

Thank Please you. Research ahead. go JJK Kloppenburg, Associates. Janet

Janet Kloppenburg

morning, everybody. all, of a Fran, congrats And great progress. on clarification. Good first of just -- the couple quick

quarter as Hollister I saying were at expect question. you be declare the and improved promos first the think driven your for they you're third fourth flat by A&F the AUR to to quarter but That's in the the the in product, higher gain? year-over-year

Hollister's you half? go secondly, And when Second any forward an there? question, what's going sometime much. then see that should into have Hollister are you encouraged in on And we look first in at with spring, could assortments inflection A&F for so we men's? concern the Thanks comps

Scott Lipesky

can and I'll then Janet, it. first get Fran up clear one real the into Hi quick

pressed we down clear in Hollister back-to-school QX, as on Abercrombie inventory. pricing was to that For for it

stores As the promotions our main the that promotions, the we're or outside holiday, of store about running going consistent into year-over-year. percent should relatively be we think

carryover we'll inventory Hollister in will a reminder, any rightsized Where buy markdowns forward we that QX be Hollister. on excess As focus inventory. and QX for

out in plays that the how QX. selling see in we'll mix So

I'll to then over kick Fran. it And

Fran Horowitz

Sure.

Janet Kloppenburg

though? hear Wait hear notes, me? up, -- Can just that you Just promos can Hollister What about my me? Hollister want to in meaningfully, say you would I clarify you for Scott, XQ? for were

Scott Lipesky

I clearance back-to-school a turned wouldn't We meaningfully. say pricing. little our more inventory through

wouldn't a I markdowns, You call take on bit it it the little but lower meaningful.

Janet Kloppenburg

Okay. Thanks much. so

Fran Horowitz

men's. regarding And

shoots. growth. exciting get, in talked third men's, script, my in we actually So saw some actually quarter, green seeing quarter about some for it's we But second the

to Abercrombie in time how seeing quite the men's encouraged So now consumer is top, some is some seeing for the it good back, that responding and we women's has like strong. our are consumer categories been

is Our outerwear strong. business

we're actually what with we're men's seeing So the business. very in encouraged

Janet Kloppenburg

A&F? That's

Fran Horowitz

then it And some this A&F, improvement exactly. quarter. was Yes. Hollister to quite great for see

good to see improvement. the to as continue mentioned, consumer business top, We're some to the is is looking outfits. seeing sequential expectation I on their Our update

buying they're top to So a new go their with jeans. perhaps

in lot we've during into didn't consumer also back-to-school. like well There's bottoms. categories quite We've so cargo non-denim pants, We responded have chased the chased happening which to enough, a those. into

Hollister in to see our So quarter-by-quarter. improvement sequential is expectation continue to

Janet Kloppenburg

lag expect Europe, do Fran? a And you in

Fran Horowitz

still Yes. I been There's in business the of international challenging. lot Europe. mean a uncertainty has

managing are We the our term, controlling We're what in short we can inventory. right?

there. do open the believe stores We are in and continuing we opportunity long-term to up

So . challenging. we'll have It's fourth brings. to see been what the quarter

Janet Kloppenburg

so Okay. Thanks much.

Janet Kloppenburg

welcome. You're

Operator

I from Now Instructions] UBS. [Operator Mauricio a will you. Thank question ahead. take Please go Serna from

line Your is open.

Mauricio Serna

the Great. And congratulations Thanks for taking on questions. my progress.

how brands, quarter. where lastly, was interested year, denim to And you weakness I particularly ask seeing if elaborate across could and like in in wanted maybe a market? freight, impact. some bit talk And the trended from a has XXX the category seeing two if the the on think about you mean, what Just outlook. bit QX Europe recall are you're on last could there then little basis point on little performance I pockets during a more the I

-- maybe want Thanks. pace. I a revert in wanted you ask to fully just if to I that quarter this more to just gradual expect or So

Fran Horowitz

here. the top up All to right, let's go back

denim. So category performance for

a So bit little actually we're seeing by brand. a difference of

had in Abercrombie business Hollister the sequentially has Abercrombie quarter gotten denim another -- better. another hit denim particularly So record women's, and

a in I record over Abercrombie mentioned What another best just in a opportunities. There's the sold seeing bottoms. pants in non-denim women's decade And and things we're from where non-bottoms into or something, happening. consumer, lot we set is quickly though, think, pants, We are right about the before really over? Yes. doing of cargo those I as very nicely, often move Hollister

we're and shifting to into are continue working, that. into what's to going do our we So receipts leaning

Scott Lipesky

right. All

weakness. Let's up to Europe, so of pockets

the you softness. seen Italy, So the the East. it it then next France, where countries, few seen strength, of U.K. seeing our that's seen and has we've think where in when Germany, we consistent. about been are in we've We've Middle kind relatively And

right some significant uncertainty the over winter. gas with Obviously, the Germany has situation now

we're the just ago, on minute a said keeping Fran eyes like So our region.

going We and lean, we will read we're can as keeping winter. through and control to inventory react what just go control, the we

the On about thinking outlook. side and the freight

that freights So up year. million about with $XX in. going a air yes, significant last year, hit high usage, we rates big coming this get had when we to back had chunk high air rates, of ocean We're

going P&L. through time to a It's lower those of flow all to take bit get rates back. little of don't for it the You

So XXXX. there again, things coming good hopefully, some in

the that year-over-year, freight of of that seeing good through those be flow higher then cotton rates. we'll But pickup in some in offset

on the the XXXX, see the So inflation good we're we've Cotton coming hopefully have through benefits hopefully, seen of costs. still, And back peak, in kind got then to and we're peak half the Freight some the in. through it. working side the and of input get we'll there. of

Mauricio Serna

much. Got it. so Thanks

Operator

are I'd back no call Horowitz further Fran you. Over over remarks. questions you. for closing to queue, any hand And there to like Thank as to in additional the the or

Fran Horowitz

thank want and season. and your today a the wishing everyone joining to call happy and safe Just you holiday for families

Operator

conference concludes participation. your Thank This you. today's for you Thank call.

You may disconnect. now

Abercrombie & Fitch (ANF) 22 Nov 222022 Q3 Earnings call transcript