Abercrombie & Fitch (ANF) Tops Q1 EPS by 15c, Slight Beat on Revenues, Comp. Sales Up 1%; Provides Q2 & FY19 Fiscal Outlook

May 29, 2019 7:36 AM EDT

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Abercrombie & Fitch (NYSE: ANF) reported Q1 EPS of ($0.29), $0.15 better than the analyst estimate of ($0.44). Revenue for the quarter came in at $733.97 million versus the consensus estimate of $733.16 million.

  • Net sales increased to $734.0 million, including the adverse impact from changes in foreign currency exchange rates of approximately $16 million or 2%.
  • Positive comparable sales of 1%, on top of 5% last year.
  • Gross profit rate of 60.5%, flat to last year.
  • Operating expense, excluding other operating income, of $472.0 million leveraged 230 basis points on a GAAP basis and 160 basis points on an adjusted non-GAAP basis.
  • Operating loss of $27.3 million. Operating loss margin improved 210 basis points from last year to 3.7%. Excluding certain items, adjusted non-GAAP operating loss margin improved 130 basis points from last year.
  • Net loss per diluted share was $0.29 compared to $0.62 last year and was adversely impacted by year-over-year changes in foreign currency exchange rates, net of hedging, of approximately $0.02. Excluding certain items, adjusted non-GAAP net loss per diluted share last year was $0.56.

Fran Horowitz, Chief Executive Officer, said, "We achieved our seventh consecutive quarter of positive comparable sales fueled by ongoing strength at Hollister and a return to positive comps at Abercrombie. This contributed to top-line growth, operating margin improvement and a net loss reduction compared to last year."

"We are focused on our transformation initiatives, with global store network optimization a key priority. We continue to believe in stores and are committed to delivering intimate, omni-channel brand experiences that closely align with our customers’ needs. In line with our strategy, we are announcing plans to close three additional flagship locations, bringing the total to five since 2017. Except for the charges from these flagship store actions, we remain on track to achieve our previously communicated fiscal 2019 outlook and continue to lay the foundation to achieving our fiscal 2020 targets."

Fiscal 2019 Second Quarter Outlook

For the second quarter of fiscal 2019, the company expects:

  • Net sales to be flat to up 2%, reflecting an adverse impact from changes in foreign currency exchange rates of approximately $10 million.
  • Comparable sales to be approximately flat, on 3% last year.
  • Gross profit rate to be down approximately 100 basis points compared to 60.2% last year, assuming only the current tariffs in place.
  • Operating expense, excluding other operating income, to be up approximately 10% from fiscal 2018 adjusted non-GAAP operating expense of $498 million, including net lease-related charges related to the flagship store actions taken in the second quarter of approximately $45 million. If not for the $45 million resulting from these actions, the company would have expected operating expense to be flat to up 1% from fiscal 2018 adjusted non-GAAP operating expense.
  • Effective tax rate to be in the mid 20s.

Fiscal 2019 Full Year Outlook

For fiscal 2019, the company expects:

  • Net sales to be up in the range of 2% to 4%, driven by positive comparable sales and net new store contribution, partially offset by an adverse impact from changes in foreign currency exchange rates of approximately $30 million of which approximately $16 million was reflected in first quarter results.
  • Comparable sales to be up low-single digits, on top of 3% last year.
  • Gross profit rate to rise slightly from the fiscal 2018 rate of 60.2%, assuming only the current tariffs in place.
  • Operating expense, excluding other operating income, to be up in the range of 4% to 5% from fiscal 2018 adjusted non-GAAPoperating expense of $2.03 billion, including net lease-related charges related to the flagship store actions taken in the second quarter of approximately $45 million. If not for the $45 million resulting from these actions, the company would have expected operating expense to be consistent with previously issued expectations of up approximately 2% from fiscal 2018 adjusted non-GAAP operating expense.
  • Effective tax rate to be in the mid 20s.
  • Diluted weighted-average shares outstanding of approximately 68 million shares, excluding the effect of potential share buybacks.
  • Capital investments of approximately $200 million.

For earnings history and earnings-related data on Abercrombie & Fitch (ANF) click here.



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