ABERCROMBIE FITCH CO DE
For the period ended Feb 3, 2024. Filed Apr 1, 2024.
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FY2024 · Filed Apr 1, 2024
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Item 7. Results of Operations
RESULTS OF OPERATIONS
The estimated basis point (“BPS”) changes disclosed throughout this Results of Operations have been rounded based on the change in the percentage of net sales.
Net Sales
Net sales by segment are presented by attributing revenues on the basis of the segment that fulfills the order. The Company’s net sales by reportable segment for Fiscal 2023 and Fiscal 2022 were as follows:
| (in thousands) | Fiscal 2023 | Fiscal 2022 | $ Change | % Change | Comparable Sales (1) |
|---|---|---|---|---|---|
| Americas | $3,455,674 | $2,920,157 | $535,517 | 18% | 13% |
| EMEA | 687,095 | 658,794 | 28,301 | 4% | 7% |
| APAC | 137,908 | 118,800 | 19,108 | 16% | 26% |
| Total Company | $4,280,677 | $3,697,751 | $582,926 | 16% | 13% |
(1)Comparable sales are calculated on a constant currency basis. Refer to“NON-GAAP FINANCIAL MEASURES,” for further details on the comparable sales calculation.
For Fiscal 2023, net sales increased 16%, as compared to Fiscal 2022, primarily due to an increase in units sold and AUR. The additional week in fiscal 2023 benefited net sales by approximately $50 million. The year-over-year increase in net sales reflects positive comparable sales of 13%, as compared to Fiscal 2022, with comparable sales growth in the Americas, EMEA, and APAC segments.
The Company’s net sales by brand for Fiscal 2023 and Fiscal 2022 were as follows:
| (in thousands) | Fiscal 2023 | Fiscal 2022 | $ Change | % Change | Comparable Sales (1) |
|---|---|---|---|---|---|
| Abercrombie (2) | $2,201,686 | $1,734,866 | $466,820 | 27% | 23% |
| Hollister (3) | 2,078,991 | 1,962,885 | 116,106 | 6% | 4% |
| Total Company | $4,280,677 | $3,697,751 | $582,926 | 16% | 13% |
(1)Comparable sales are calculated on a constant currency basis. Refer to“NON-GAAP FINANCIAL MEASURES,” for further details on the comparable sales calculation.
(2)Abercrombie brands includes Abercrombie & Fitch and abercrombie kids.
(3)Hollister brands includes Hollister and Gilly Hicks.
Cost of Sales, Exclusive of Depreciation and Amortization
| Fiscal 2023 · Fiscal 2022 | |||||
|---|---|---|---|---|---|
| (in thousands) · % of Net Sales · % of Net Sales · BPS Change | |||||
| Cost of sales, exclusive of depreciation and amortization | $1,587,265 | 37.1% | $1,593,213 | 43.1% | (600) |
For Fiscal 2023, cost of sales, exclusive of depreciation and amortization, as a percentage of net sales decreased approximately 600 basis points as compared to Fiscal 2022. The decrease was primarily attributable to approximately 340 basis points of higher average unit retail and approximately 300 basis points from the combination of lower freight costs and higher raw materials compared to Fiscal 2022. These benefits were partially offset by approximately 30 basis points from the adverse impact of exchange rates.
Gross Profit, Exclusive of Depreciation and Amortization
| Fiscal 2023 · Fiscal 2022 | |||||
|---|---|---|---|---|---|
| % of Net Sales · % of Net Sales · BPS Change | |||||
| Gross profit, exclusive of depreciation and amortization | $2,693,412 | 62.9% | $2,104,538 | 56.9% | 600 |
Stores and Distribution Expense
| Fiscal 2023 · Fiscal 2022 | |||||
|---|---|---|---|---|---|
| (in thousands) · % of Net Sales · % of Net Sales · BPS Change | |||||
| Stores and distribution expense | $1,571,737 | 36.7% | $1,496,962 | 40.5% | (380) |
For Fiscal 2023, stores and distribution expense, as a percentage of net sales, decreased 380 basis points as compared to Fiscal 2022. The decrease was primarily driven by expense leverage as a result of net sales growth, slightly offset by an increase of $18 million in store occupancy expense compared to Fiscal 2022.
Marketing, General and Administrative Expense
| Fiscal 2023 · Fiscal 2022 | |||||
|---|---|---|---|---|---|
| (in thousands) · % of Net Sales · % of Net Sales · BPS Change | |||||
| Marketing, general and administrative expense | $642,877 | 15.0% | $517,602 | 14.0% | 100 |
For Fiscal 2023, marketing, general and administrative expense, as a percentage of net sales increased 100 basis points as compared to Fiscal 2022, primarily due to an increase in incentive compensation, marketing, the 53rd reporting week and digital and technology expenses.
Other Operating Income, Net
| Fiscal 2023 · Fiscal 2022 | |||||
|---|---|---|---|---|---|
| (in thousands) · % of Net Sales · % of Net Sales · BPS Change | |||||
| Other operating income, net | $5,873 | 0.1% | $2,674 | 0.1% | — |
For Fiscal 2023, other operating income, net, increased as compared to Fiscal 2022, primarily due to $0.9 million foreign currency gain recognized in Fiscal 2023.
Operating Income
| Fiscal 2023 · Fiscal 2022 | |||||
|---|---|---|---|---|---|
| (in thousands) · % of Net Sales · % of Net Sales · BPS Change | |||||
| Operating income | $484,671 | 11.3% | $92,648 | 2.5% | 880 |
| Excluded items: | |||||
| Asset impairment charges (1) | 4,436 | 0.1% | 14,031 | 0.4% | (30) |
| Adjusted non-GAAP operating income | $489,107 | 11.4% | $106,679 | 2.9% | 850 |
(1)Refer to “NON-GAAP FINANCIAL MEASURES,” for further details.
Interest Expense, Net
| Fiscal 2023 · Fiscal 2022 | |||||
|---|---|---|---|---|---|
| (in thousands) · % of Net Sales · % of Net Sales · BPS Change | |||||
| Interest expense | $30,352 | 0.7% | $30,236 | 0.8% | (10) |
| Interest income | (29,980) | (0.7)% | (4,604) | (0.1)% | (60) |
| Interest expense, net | $372 | —% | $25,632 | 0.7% | (70) |
For Fiscal 2023, interest expense, net, decreased 70 basis points as compared to Fiscal 2022. The net decrease can be attributable to higher interest income due to the increase in balance and rates received on deposits and money market accounts as compared to Fiscal 2022.
Income Tax Expense
| Fiscal 2023 · Fiscal 2022 | ||||
|---|---|---|---|---|
| (in thousands, except ratios) · Effective Tax Rate · Effective Tax Rate | ||||
| Income tax expense | $148,886 | 30.7% | $56,631 | 84.5% |
| Excluded items: | ||||
| Tax effect of pre-tax excluded items (1) | 1,231 | 3,802 | ||
| Adjusted non-GAAP income tax expense | $150,117 | 30.7% | $60,433 | 74.6% |
(1)Refer to“Operating Income”for details of pre-tax excluded items. The tax effect of pre-tax excluded items is the difference between the tax provision calculation on a GAAP basis and an adjusted non-GAAP basis. Refer to “NON-GAAP FINANCIAL MEASURES” for further details.
The increase in income tax expense compared to Fiscal 2022 can be attributed to higher domestic income resulting from higher sales volume and higher AURs.
During Fiscal 2023, the Company did not recognize income tax benefits on $103.0 million of pre-tax losses, primarily in Switzerland, resulting in adverse tax impacts of $15.6 million. The primary driver relates to expense deleverage within the APAC and EMEA regions, although to a lesser extent than in the prior year.
During Fiscal 2022, the Company did not recognize income tax benefits on $136.5 million of pre-tax losses, primarily in Switzerland, resulting in adverse tax impacts of $20.0 million. The primary driver relates to lower sales volume, higher AUC and overall expense deleverage within the APAC and EMEA regions.
Refer to Note 11, “INCOME TAXES,” for further discussion on factors that impacted the effective tax rate in Fiscal 2023 and Fiscal 2022.
Net Income Attributable to A&F
| Fiscal 2023 · Fiscal 2022 | |||||
|---|---|---|---|---|---|
| (in thousands) · % of Net Sales · % of Net Sales · BPS Change | |||||
| Net income attributable to A&F | $328,123 | 7.7% | $2,816 | 0.1% | 760 |
| Excluded items, net of tax (1) | 3,205 | 0.1% | 10,229 | 0.3% | (20) |
| Adjusted non-GAAP net income attributable to A&F (2) | $331,328 | 7.7% | $13,045 | 0.4% | 730 |
(1)Excludes items presented above under “Operating Income,” and “Income Tax Expense.”
(2)Refer to “NON-GAAP FINANCIAL MEASURES,” for further details.
Net Income Per Diluted Share Attributable to A&F
| Fiscal 2023 | Fiscal 2022 | $ Change | |
|---|---|---|---|
| Net income per diluted share attributable to A&F | $6.22 | $0.05 | $6.17 |
| Excluded items, net of tax (1) | 0.06 | 0.20 | (0.14) |
| Adjusted non-GAAP net income per diluted share attributable to A&F | $6.28 | $0.25 | $6.03 |
| Impact from changes in foreign currency exchange rates | — | (0.13) | 0.13 |
| Adjusted non-GAAP net income per diluted share attributable to A&F on a constant currency basis(2) | $6.28 | $0.12 | $6.16 |
(1) Excludes items presented above under “Operating Income,” and “Income Tax Expense.”
(2)Refer to “NON-GAAP FINANCIAL MEASURES,” for further details.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.