x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 31-1469076 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
6301 Fitch Path, New Albany, Ohio | 43054 |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | x | Accelerated filer | ¨ |
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Emerging growth company | ¨ |
Class A Common Stock | Outstanding at June 1, 2017 | |
$.01 Par Value | 86,016,786 Shares |
Page No. | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 6. |
ITEM 1. | FINANCIAL STATEMENTS |
Thirteen Weeks Ended | |||||||
April 29, 2017 | April 30, 2016 | ||||||
Net sales | $ | 661,099 | $ | 685,483 | |||
Cost of sales, exclusive of depreciation and amortization | 262,174 | 259,762 | |||||
Gross profit | 398,925 | 425,721 | |||||
Stores and distribution expense | 359,929 | 369,118 | |||||
Marketing, general and administrative expense | 109,893 | 114,447 | |||||
Asset impairment | 730 | — | |||||
Other operating income, net | (1,686 | ) | (2,933 | ) | |||
Operating loss | (69,941 | ) | (54,911 | ) | |||
Interest expense, net | 4,120 | 4,506 | |||||
Loss before taxes | (74,061 | ) | (59,417 | ) | |||
Income tax benefit | (13,052 | ) | (20,787 | ) | |||
Net loss | (61,009 | ) | (38,630 | ) | |||
Less: Net income attributable to noncontrolling interests | 691 | 957 | |||||
Net loss attributable to Abercrombie & Fitch Co. | $ | (61,700 | ) | $ | (39,587 | ) | |
Net loss per share attributable to Abercrombie & Fitch Co. | |||||||
Basic | $ | (0.91 | ) | $ | (0.59 | ) | |
Diluted | $ | (0.91 | ) | $ | (0.59 | ) | |
Weighted-average shares outstanding | |||||||
Basic | 68,073 | 67,625 | |||||
Diluted | 68,073 | 67,625 | |||||
Dividends declared per share | $ | 0.20 | $ | 0.20 | |||
Other comprehensive income | |||||||
Foreign currency translation, net of tax | $ | 5,607 | $ | 20,425 | |||
Derivative financial instruments, net of tax | (4,600 | ) | (9,955 | ) | |||
Other comprehensive income | 1,007 | 10,470 | |||||
Comprehensive loss | (60,002 | ) | (28,160 | ) | |||
Less: Comprehensive income attributable to noncontrolling interests | 691 | 957 | |||||
Comprehensive loss attributable to Abercrombie & Fitch Co. | $ | (60,693 | ) | $ | (29,117 | ) |
April 29, 2017 | January 28, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 421,441 | $ | 547,189 | |||
Receivables | 90,346 | 93,384 | |||||
Inventories, net | 398,750 | 399,795 | |||||
Other current assets | 91,565 | 98,932 | |||||
Total current assets | 1,002,102 | 1,139,300 | |||||
Property and equipment, net | 806,057 | 824,738 | |||||
Other assets | 349,806 | 331,719 | |||||
Total assets | $ | 2,157,965 | $ | 2,295,757 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 147,531 | $ | 187,017 | |||
Accrued expenses | 248,915 | 273,044 | |||||
Short-term portion of deferred lease credits | 19,522 | 20,076 | |||||
Income taxes payable | 5,264 | 5,863 | |||||
Total current liabilities | 421,232 | 486,000 | |||||
Long-term liabilities: | |||||||
Long-term portion of deferred lease credits | 75,886 | 76,321 | |||||
Long-term portion of borrowings, net | 263,353 | 262,992 | |||||
Leasehold financing obligations | 47,120 | 46,397 | |||||
Other liabilities | 169,588 | 172,008 | |||||
Total long-term liabilities | 555,947 | 557,718 | |||||
Stockholders’ equity | |||||||
Class A Common Stock - $0.01 par value: 150,000 shares authorized and 103,300 shares issued at each of April 29, 2017 and January 28, 2017 | 1,033 | 1,033 | |||||
Paid-in capital | 387,394 | 396,590 | |||||
Retained earnings | 2,393,693 | 2,474,703 | |||||
Accumulated other comprehensive loss, net of tax | (120,295 | ) | (121,302 | ) | |||
Treasury stock, at average cost: 35,288 and 35,542 shares at April 29, 2017 and January 28, 2017, respectively | (1,489,853 | ) | (1,507,589 | ) | |||
Total Abercrombie & Fitch Co. stockholders’ equity | 1,171,972 | 1,243,435 | |||||
Noncontrolling interests | 8,814 | 8,604 | |||||
Total stockholders’ equity | 1,180,786 | 1,252,039 | |||||
Total liabilities and stockholders’ equity | $ | 2,157,965 | $ | 2,295,757 |
Thirteen Weeks Ended | |||||||
April 29, 2017 | April 30, 2016 | ||||||
Operating activities | |||||||
Net loss | $ | (61,009 | ) | $ | (38,630 | ) | |
Adjustments to reconcile net loss to net cash used by operating activities: | |||||||
Depreciation and amortization | 48,789 | 50,866 | |||||
Asset impairment | 730 | — | |||||
Loss on disposal | 2,378 | 1,287 | |||||
Amortization of deferred lease credits | (5,325 | ) | (6,506 | ) | |||
Benefit from deferred income taxes | (15,100 | ) | (21,195 | ) | |||
Share-based compensation | 4,880 | 6,599 | |||||
Net tax deficit on share-based compensation | (9,264 | ) | (951 | ) | |||
Changes in assets and liabilities | |||||||
Inventories, net | 1,316 | 3,547 | |||||
Accounts payable and accrued expenses | (62,120 | ) | (63,748 | ) | |||
Lessor construction allowances | 2,940 | 1,881 | |||||
Income taxes | 8,630 | (3,888 | ) | ||||
Long-term lease deposits | (41 | ) | 23,309 | ||||
Other assets | 8,367 | (10,283 | ) | ||||
Other liabilities | (9,433 | ) | (17,996 | ) | |||
Net cash used by operating activities | (84,262 | ) | (75,708 | ) | |||
Investing activities | |||||||
Purchases of property and equipment | (32,081 | ) | (25,983 | ) | |||
Proceeds from sale of property and equipment | 203 | 4,098 | |||||
Net cash used for investing activities | (31,878 | ) | (21,885 | ) | |||
Financing activities | |||||||
Dividends paid | (13,554 | ) | (13,471 | ) | |||
Other financing activities | (551 | ) | (372 | ) | |||
Net cash used for financing activities | (14,105 | ) | (13,843 | ) | |||
Effect of exchange rates on cash | 4,497 | 13,833 | |||||
Net decrease in cash and equivalents | (125,748 | ) | (97,603 | ) | |||
Cash and equivalents, beginning of period | 547,189 | 588,578 | |||||
Cash and equivalents, end of period | $ | 421,441 | $ | 490,975 | |||
Significant non-cash investing activities | |||||||
Change in accrual for construction in progress | $ | (4,297 | ) | $ | (21 | ) | |
Supplemental information | |||||||
Cash paid for interest | $ | 3,391 | $ | 3,763 | |||
Cash paid for income taxes, net of refunds | $ | 3,364 | $ | 15,969 |
Accounting Standards Update (ASU) | Description | Date of Adoption | Effect on the Financial Statements or Other Significant Matters | |||
Standards adopted | ||||||
ASU 2015-11, Simplifying the Measurement of Inventory | This update amends ASC 330, Inventory. The new guidance applies to inventory measured using first-in, first-out (FIFO) or average cost. Under this amendment, inventory is to be measured at the lower of cost and net realizable value, which is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. | January 29, 2017* | The adoption of this guidance did not have any impact on the Company's consolidated financial statements. | |||
ASU 2016-09, Compensation—Stock Compensation | This update amends ASC 718, Compensation. Under the new guidance, tax benefits and certain tax deficiencies arising from the vesting of share-based payments are to be recognized as income tax benefits or expenses in the statement of operations; whereas, under the previous guidance, such benefits and deficiencies were recorded in additional paid-in-capital. The cash flow effects of the tax benefit are to be reported in cash flows from operating activities; whereas, they were previously reported in cash flows from financing activities. This guidance also allows for entities to make a policy election to estimate forfeitures or account for them when they occur. | January 29, 2017* | As required by the update, all excess tax benefits and tax deficiencies recognized on share-based compensation expense are reflected in the condensed consolidated statements of income as a component of the provision for income taxes on a prospective basis. This update resulted in additional non-cash income tax expense of $9.3 million in the first quarter of Fiscal 2017. In addition, excess tax benefits and tax deficiencies recognized on share-based compensation expense are now classified as an operating activity on the condensed consolidated statements of cash flows. The Company has applied this provision on a retrospective basis. For the first quarter of Fiscal 2016, net cash used by operating activities decreased by $0.6 million with a corresponding offset to net cash used for financing activities. The Company has elected to maintain its practice of estimating forfeitures when recognizing expense for share-based payment awards rather than accounting for forfeitures when they occur. Based on share-based compensation awards currently outstanding at current stock prices, the adoption of this guidance will result in non-cash income tax expense of approximately $11 million for Fiscal 2017 and $20 million for Fiscal 2018. | |||
Standards not yet adopted | ||||||
ASU 2014-09, Revenue from Contracts with Customers | This update supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. The new guidance requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods or services. | February 4, 2018 | The Company is currently evaluating the impact that this guidance will have on its consolidated financial statements. | |||
ASU 2016-02, Leases | This update supersedes the leasing requirements in ASC 840, Leases. The new guidance requires an entity to recognize lease assets and lease liabilities on the balance sheet and disclose key leasing information that depicts the lease rights and obligations of an entity. | February 3, 2019* | The Company expects that this guidance will result in a significant increase in the Company’s long-term assets and long-term liabilities on the Company's consolidated balance sheets, and is currently evaluating additional impacts that it may have on its consolidated financial statements. |
Thirteen Weeks Ended | |||||
(in thousands) | April 29, 2017 | April 30, 2016 | |||
Shares of common stock issued | 103,300 | 103,300 | |||
Weighted-average treasury shares | (35,227 | ) | (35,675 | ) | |
Weighted-average — basic shares | 68,073 | 67,625 | |||
Dilutive effect of share-based compensation awards | — | — | |||
Weighted-average — diluted shares | 68,073 | 67,625 | |||
Anti-dilutive shares (1) | 5,263 | 7,954 |
(1) | Reflects the total number of shares related to outstanding share-based compensation awards that have been excluded from the computation of net loss per diluted share because the impact would have been anti-dilutive. |
• | Level 1—inputs are unadjusted quoted prices for identical assets or liabilities that are available in active markets that the Company can access at the measurement date. |
• | Level 2—inputs are other than quoted market prices included within Level 1 that are observable for assets or liabilities, directly or indirectly. |
• | Level 3—inputs to the valuation methodology are unobservable. |
Assets and Liabilities at Fair Value as of April 29, 2017 | |||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets: | |||||||||||||||
Trust-owned life insurance policies (at cash surrender value) | $ | — | $ | 100,417 | $ | — | $ | 100,417 | |||||||
Money market funds | 21 | — | — | 21 | |||||||||||
Derivative financial instruments | — | 2,415 | — | 2,415 | |||||||||||
Total assets | $ | 21 | $ | 102,832 | $ | — | $ | 102,853 | |||||||
Liabilities: | |||||||||||||||
Derivative financial instruments | $ | — | $ | 1,243 | $ | — | $ | 1,243 | |||||||
Total liabilities | $ | — | $ | 1,243 | $ | — | $ | 1,243 |
Assets at Fair Value as of January 28, 2017 | |||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets: | |||||||||||||||
Trust-owned life insurance policies (at cash surrender value) | $ | — | $ | 99,654 | $ | — | $ | 99,654 | |||||||
Money market funds | 94,026 | — | — | 94,026 | |||||||||||
Derivative financial instruments | — | 6,042 | — | 6,042 | |||||||||||
Total assets | $ | 94,026 | $ | 105,696 | $ | — | $ | 199,722 | |||||||
Liabilities: | |||||||||||||||
Derivative financial instruments | $ | — | $ | 492 | $ | — | $ | 492 | |||||||
Total liabilities | $ | — | $ | 492 | $ | — | $ | 492 |
(in thousands) | April 29, 2017 | January 28, 2017 | |||||
Gross borrowings outstanding, carrying amount | $ | 268,250 | $ | 268,250 | |||
Gross borrowings outstanding, fair value | $ | 258,861 | $ | 260,551 |
(in thousands) | April 29, 2017 | January 28, 2017 | |||||
Property and equipment, at cost | $ | 2,766,557 | $ | 2,772,139 | |||
Less: Accumulated depreciation and amortization | (1,960,500 | ) | (1,947,401 | ) | |||
Property and equipment, net | $ | 806,057 | $ | 824,738 |
Number of Underlying Shares | Weighted-Average Exercise Price | Aggregate Intrinsic Value | Weighted-Average Remaining Contractual Life | |||||||||
Outstanding at January 28, 2017 | 189,800 | $ | 76.62 | |||||||||
Granted | — | — | ||||||||||
Exercised | — | — | ||||||||||
Forfeited or expired | (75,000 | ) | 73.42 | |||||||||
Outstanding at April 29, 2017 | 114,800 | $ | 78.71 | $ | — | 0.8 | ||||||
Stock options exercisable at April 29, 2017 | 114,800 | $ | 78.71 | $ | — | 0.8 |
Number of Underlying Shares | Weighted-Average Exercise Price | Aggregate Intrinsic Value | Weighted-Average Remaining Contractual Life | |||||||||
Outstanding at January 28, 2017 | 4,079,050 | $ | 47.49 | |||||||||
Granted | — | — | ||||||||||
Exercised | — | — | ||||||||||
Forfeited or expired | (888,197 | ) | 44.34 | |||||||||
Outstanding at April 29, 2017 | 3,190,853 | $ | 48.50 | $ | — | 3.0 | ||||||
Stock appreciation rights exercisable at April 29, 2017 | 2,841,662 | $ | 51.22 | $ | — | 2.5 | ||||||
Stock appreciation rights expected to become exercisable in the future as of April 29, 2017 | 267,161 | $ | 26.63 | $ | — | 7.7 |
Service-based Restricted Stock Units | Performance-based Restricted Stock Units | Market-based Restricted Stock Units | ||||||||||||||||||
Number of Underlying Shares(1) | Weighted- Average Grant Date Fair Value | Number of Underlying Shares | Weighted- Average Grant Date Fair Value | Number of Underlying Shares | Weighted- Average Grant Date Fair Value | |||||||||||||||
Unvested at January 28, 2017 | 1,915,461 | $ | 25.47 | 203,923 | $ | 22.53 | 184,892 | $ | 26.89 | |||||||||||
Granted | 1,408,972 | 9.61 | 524,030 | 9.11 | 236,872 | 11.79 | ||||||||||||||
Adjustments for performance achievement | — | — | — | — | — | — | ||||||||||||||
Vested | (466,291 | ) | 28.86 | — | — | — | — | |||||||||||||
Forfeited | (122,813 | ) | 22.37 | (5,163 | ) | 25.15 | (5,165 | ) | 29.55 | |||||||||||
Unvested at April 29, 2017 | 2,735,329 | $ | 16.81 | 722,790 | $ | 12.26 | 416,599 | $ | 17.25 |
(1) | This includes 786,449 unvested restricted stock units as of April 29, 2017 that are subject to the requirement that the Company must achieve at least $1.00 of GAAP net income attributable to A&F for the fiscal year in order to vest. |
(in thousands) | April 29, 2017 | April 30, 2016 | |||||
Service-based restricted stock units: | |||||||
Total grant date fair value of awards granted | $ | 13,540 | $ | 21,445 | |||
Total grant date fair value of awards vested | 13,457 | 12,892 | |||||
Performance-based restricted stock units: | |||||||
Total grant date fair value of awards granted | $ | 4,774 | $ | 2,762 | |||
Total grant date fair value of awards vested | — | 1,151 | |||||
Market-based restricted stock units: | |||||||
Total grant date fair value of awards granted | $ | 2,793 | $ | 3,601 | |||
Total grant date fair value of awards vested | — | — |
April 29, 2017 | April 30, 2016 | ||||||
Grant date market price | $ | 11.43 | $ | 31.67 | |||
Fair value | $ | 11.79 | $ | 38.22 | |||
Assumptions: | |||||||
Price volatility | 47 | % | 44 | % | |||
Expected term (years) | 2.9 | 2.8 | |||||
Risk-free interest rate | 1.5 | % | 1.1 | % | |||
Dividend yield | 7.0 | % | 2.5 | % | |||
Average volatility of peer companies | 35.2 | % | 34.4 | % | |||
Average correlation coefficient of peer companies | 0.2664 | 0.3382 |
(in thousands) | Notional Amount(1) | ||
Euro | $ | 81,038 | |
British pound | $ | 30,243 | |
Canadian dollar | $ | 15,119 | |
Japanese yen | $ | 7,934 |
(1) | Amounts reported are the U.S. Dollar notional amounts outstanding as of April 29, 2017. |
(in thousands) | Notional Amount(1) | ||
Euro | $ | 13,895 | |
British pound | $ | 1,283 |
(1) | Amounts reported are the U.S. Dollar notional amounts outstanding as of April 29, 2017. |
(in thousands) | Location | April 29, 2017 | January 28, 2017 | Location | April 29, 2017 | January 28, 2017 | |||||||||||||
Derivatives designated as hedging instruments: | |||||||||||||||||||
Foreign currency exchange forward contracts | Other current assets | $ | 2,415 | $ | 5,920 | Accrued expenses | $ | 1,226 | $ | 486 | |||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||||||
Foreign currency exchange forward contracts | Other current assets | $ | — | $ | 122 | Accrued expenses | $ | 17 | $ | 6 | |||||||||
Total | Other current assets | $ | 2,415 | $ | 6,042 | Accrued expenses | $ | 1,243 | $ | 492 |
Thirteen Weeks Ended | |||||||||
April 29, 2017 | April 30, 2016 | ||||||||
(in thousands) | Location | Gain/(Loss) | Gain/(Loss) | ||||||
Derivatives not designated as hedging instruments: | |||||||||
Foreign currency exchange forward contracts | Other operating income, net | $ | 28 | $ | (1,777 | ) |
Effective Portion | Ineffective Portion and Amount Excluded from Effectiveness Testing | ||||||||||||||||||||||||||
Amount of Loss Recognized in OCI on Derivative Contracts (1) | Location of Gain Reclassified from AOCL into Earnings | Amount of Gain Reclassified from AOCL into Earnings (2) | Location of Gain Recognized in Earnings on Derivative Contracts | Amount of Gain Recognized in Earnings on Derivative Contracts (3) | |||||||||||||||||||||||
Thirteen Weeks Ended | |||||||||||||||||||||||||||
(in thousands) | April 29, 2017 | April 30, 2016 | April 29, 2017 | April 30, 2016 | April 29, 2017 | April 30, 2016 | |||||||||||||||||||||
Derivatives in cash flow hedging relationships: | |||||||||||||||||||||||||||
Foreign currency exchange forward contracts | $ | (1,373 | ) | $ | (9,382 | ) | Cost of sales, exclusive of depreciation and amortization | $ | 3,535 | $ | 2,305 | Other operating income, net | $ | 528 | $ | 355 |
(1) | The amount represents the change in fair value of derivative contracts due to changes in spot rates. |
(2) | The amount represents the reclassification from AOCL into earnings when the hedged item affects earnings, which is when merchandise is sold to the Company’s customers. |
(3) | The amount represents the change in fair value of derivative contracts due to changes in the difference between the spot price and forward price that is excluded from the assessment of hedge effectiveness and, therefore, recognized in earnings. |
Thirteen Weeks Ended April 29, 2017 | |||||||||||
(in thousands) | Foreign Currency Translation Adjustment | Unrealized Gain (Loss) on Derivative Financial Instruments | Total | ||||||||
Beginning balance at January 28, 2017 | $ | (126,127 | ) | $ | 4,825 | $ | (121,302 | ) | |||
Other comprehensive income (loss) before reclassifications | 5,607 | (1,373 | ) | 4,234 | |||||||
Reclassified from accumulated other comprehensive loss (1) | — | (3,535 | ) | (3,535 | ) | ||||||
Tax effect | — | 308 | 308 | ||||||||
Other comprehensive income (loss) | 5,607 | (4,600 | ) | 1,007 | |||||||
Ending balance at April 29, 2017 | $ | (120,520 | ) | $ | 225 | $ | (120,295 | ) |
(1) | For the thirteen weeks ended April 29, 2017, a gain was reclassified from accumulated other comprehensive loss to cost of sales, exclusive of depreciation and amortization on the Condensed Consolidated Statement of Operations and Comprehensive Loss. |
Thirteen Weeks Ended April 30, 2016 | |||||||||||
(in thousands) | Foreign Currency Translation Adjustment | Unrealized Gain (Loss) on Derivative Financial Instruments | Total | ||||||||
Beginning balance at January 30, 2016 | $ | (119,196 | ) | $ | 4,577 | $ | (114,619 | ) | |||
Other comprehensive income (loss) before reclassifications | 25,660 | (9,382 | ) | 16,278 | |||||||
Reclassified from accumulated other comprehensive loss (2) | — | (2,305 | ) | (2,305 | ) | ||||||
Tax effect | (5,235 | ) | 1,732 | (3,503 | ) | ||||||
Other comprehensive income (loss) | 20,425 | (9,955 | ) | 10,470 | |||||||
Ending balance at April 30, 2016 | $ | (98,771 | ) | $ | (5,378 | ) | $ | (104,149 | ) |
(2) | For the thirteen weeks ended April 30, 2016, a gain was reclassified from accumulated other comprehensive loss to cost of sales, exclusive of depreciation and amortization on the Condensed Consolidated Statement of Operations and Comprehensive Loss. |
Thirteen Weeks Ended | |||||||
(in thousands) | April 29, 2017 | April 30, 2016 | |||||
Hollister | $ | 374,677 | $ | 362,147 | |||
Abercrombie | 286,422 | 323,336 | |||||
Total | $ | 661,099 | $ | 685,483 |
Thirteen Weeks Ended | |||||||
(in thousands) | April 29, 2017 | April 30, 2016 | |||||
United States | $ | 409,068 | $ | 425,429 | |||
Europe | 154,984 | 161,457 | |||||
Other | 97,047 | 98,597 | |||||
Total | $ | 661,099 | $ | 685,483 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
(in thousands, except change in comparable sales, gross profit rate and per share amounts) | April 29, 2017 | April 30, 2016 | ||||||
Net sales | $ | 661,099 | $ | 685,483 | ||||
Change in comparable sales(1) | (3 | )% | (4 | )% | ||||
Gross profit rate | 60.3 | % | 62.1 | % | ||||
Operating loss | $ | (69,941 | ) | $ | (54,911 | ) | ||
Net loss attributable to A&F | $ | (61,700 | ) | $ | (39,587 | ) | ||
Net loss per diluted share attributable to A&F | $ | (0.91 | ) | $ | (0.59 | ) |
(1) | Changes in comparable sales are calculated on a constant currency basis by converting prior year store and online sales at current year exchange rates. For inclusion in this calculation, a store must have been open as the same brand at least one year and its square footage must not have been expanded or reduced by more than 20% within the past year. |
• | Comparable sales to remain challenging in the second quarter, with trend improvement in the second half of the year. |
• | Continued adverse impact from foreign currency on sales and operating income. |
• | A gross profit rate down slightly to last year's adjusted non-GAAP rate of 61.0%, with continued pressure in the second quarter. |
• | Operating expense to be down at least 3% from last year's adjusted non-GAAP operating expense of $2.025 billion, with approximately 65% of the full year reduction to occur in the second half of the year. |
• | Net income attributable to noncontrolling interests of approximately $4 million. |
• | A weighted average diluted share count of approximately 68 million shares, excluding the effect of potential share buybacks. |
Hollister (1) | Abercrombie (2) | Total | |||||||||||||||
United States | International | United States | International | United States | International | ||||||||||||
January 28, 2017 | 398 | 145 | 311 | 44 | 709 | 189 | |||||||||||
New | 1 | — | 2 | — | 3 | — | |||||||||||
Closed | (2 | ) | — | (5 | ) | (1 | ) | (7 | ) | (1 | ) | ||||||
April 29, 2017 | 397 | 145 | 308 | 43 | 705 | 188 | |||||||||||
Gross square feet (in thousands): | |||||||||||||||||
April 29, 2017 | 2,717 | 1,216 | 2,396 | 610 | 5,113 | 1,826 | |||||||||||
Hollister (1) | Abercrombie (2) | Total | |||||||||||||||
United States | International | United States | International | United States | International | ||||||||||||
January 30, 2016 | 414 | 139 | 340 | 39 | 754 | 178 | |||||||||||
New | — | 2 | 1 | — | 1 | 2 | |||||||||||
Closed | (3 | ) | — | (7 | ) | — | (10 | ) | — | ||||||||
April 30, 2016 | 411 | 141 | 334 | 39 | 745 | 180 | |||||||||||
Gross square feet (in thousands): | |||||||||||||||||
April 30, 2016 | 2,834 | 1,195 | 2,561 | 619 | 5,395 | 1,814 |
(1) | Excludes five international franchise stores as of April 29, 2017, three international franchise stores as of January 28, 2017 and two international franchise stores as of April 30, 2016 and January 30, 2016. |
(2) | Includes Abercrombie & Fitch and abercrombie kids brands. Excludes three international franchise stores as of April 29, 2017 and one international franchise store as of January 28, 2017, April 30, 2016 and January 30, 2016. |
Thirteen Weeks Ended | |||||||||||||||||
April 29, 2017 | April 30, 2016 | ||||||||||||||||
(in thousands) | Net Sales | Change in Comparable Sales(1) | Net Sales | Change in Comparable Sales(1) | Net Sales $ Change | Net Sales % Change | |||||||||||
Hollister | $ | 374,677 | 3% | $ | 362,147 | —% | $ | 12,530 | 3% | ||||||||
Abercrombie(2) | 286,422 | (10)% | 323,336 | (8)% | (36,914 | ) | (11)% | ||||||||||
Total net sales | $ | 661,099 | (3)% | $ | 685,483 | (4)% | $ | (24,384 | ) | (4)% | |||||||
United States | $ | 409,068 | (3)% | $ | 425,429 | (2)% | $ | (16,361 | ) | (4)% | |||||||
International | 252,031 | (2)% | 260,054 | (7)% | (8,023 | ) | (3)% | ||||||||||
Total net sales | $ | 661,099 | (3)% | $ | 685,483 | (4)% | $ | (24,384 | ) | (4)% |
(1) | Changes in comparable sales are calculated on a constant currency basis by converting prior year store and online sales at current year exchange rates. For inclusion in this calculation, a store must have been open as the same brand at least one year and its square footage must not have been expanded or reduced by more than 20% within the past year. |
(2) | Includes Abercrombie & Fitch and abercrombie kids brands. |
Thirteen Weeks Ended | |||||||||||
April 29, 2017 | April 30, 2016 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Cost of sales, exclusive of depreciation and amortization | $ | 262,174 | 39.7% | $ | 259,762 | 37.9% | |||||
Gross profit | $ | 398,925 | 60.3% | $ | 425,721 | 62.1% |
Thirteen Weeks Ended | |||||||||||
April 29, 2017 | April 30, 2016 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Stores and distribution expense | $ | 359,929 | 54.4% | $ | 369,118 | 53.8% |
Thirteen Weeks Ended | |||||||||||
April 29, 2017 | April 30, 2016 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Marketing, general and administrative expense | $ | 109,893 | 16.6% | $ | 114,447 | 16.7% |
Thirteen Weeks Ended | |||||||||||
April 29, 2017 | April 30, 2016 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Other operating income, net | $ | 1,686 | 0.3% | $ | 2,933 | 0.4% |
Thirteen Weeks Ended | |||||||||||
April 29, 2017 | April 30, 2016 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Operating loss | $ | (69,941 | ) | (10.6)% | $ | (54,911 | ) | (8.0)% |
Thirteen Weeks Ended | |||||||||||
April 29, 2017 | April 30, 2016 | ||||||||||
(in thousands) | % of Net Sales | % of Net Sales | |||||||||
Interest expense | $ | 5,333 | 0.8% | $ | 5,613 | 0.8% | |||||
Interest income | (1,213 | ) | (0.2)% | (1,107 | ) | (0.2)% | |||||
Interest expense, net | $ | 4,120 | 0.6% | $ | 4,506 | 0.7% |
Thirteen Weeks Ended | |||||||||||
April 29, 2017 | April 30, 2016 | ||||||||||
(in thousands, except ratios) | Effective Tax Rate | Effective Tax Rate | |||||||||
Income tax benefit | $ | (13,052 | ) | 17.6% | $ | (20,787 | ) | 35.0% |
(in thousands) | April 29, 2017 | April 30, 2016 | |||||
Borrowings, gross at carrying amount | $ | 268,250 | $ | 293,250 | |||
Unamortized discount | (1,666 | ) | (2,250 | ) | |||
Unamortized fees | (3,231 | ) | (4,385 | ) | |||
Borrowings, net | 263,353 | 286,615 | |||||
Less: short-term portion of borrowings, net | — | (733 | ) | ||||
Long-term portion of borrowings, net | $ | 263,353 | $ | 285,882 |
• | changes in global economic and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits, could have a material adverse effect on our business, results of operations and liquidity; |
• | our inability to anticipate customer demand and changing fashion trends and to manage our inventory commensurately could adversely impact our sales levels and profitability; |
• | our market share may be negatively impacted by increasing competition and pricing pressures from companies with brands or merchandise competitive with ours; |
• | direct-to-consumer sales channels are a significant component of our growth strategy, and the failure to successfully develop our position in these channels could have an adverse impact on our results of operations; |
• | our ability to conduct business in international markets may be adversely affected by legal, regulatory, political and economic risks; |
• | our inability to successfully implement our strategic plans could have a negative impact on our growth and profitability; |
• | our failure to protect our reputation could have a material adverse effect on our brands; |
• | our business could suffer if our information technology systems are disrupted or cease to operate effectively; |
• | we may be exposed to risks and costs associated with cyber-attacks, credit card fraud and identity theft that would cause us to incur unexpected expenses and reputation loss; |
• | fluctuations in foreign currency exchange rates could adversely impact our financial condition and results of operations; |
• | changes in the cost, availability and quality of raw materials, labor, transportation and trade relations could cause manufacturing delays and increase our costs; |
• | we depend upon independent third parties for the manufacture and delivery of all our merchandise, and a disruption of the manufacture or delivery of our merchandise could result in lost sales and could increase our costs; |
• | our ability to attract customers to our stores depends, in part, on the success of the shopping malls or area attractions that our stores are located in or around; |
• | we rely on the experience and skills of our senior executive officers, the loss of whom could have a material adverse effect on our business; |
• | our reliance on DCs makes us susceptible to disruptions or adverse conditions affecting our supply chain; |
• | our litigation exposure could have a material adverse effect on our financial condition and results of operations; |
• | our inability or failure to adequately protect our trademarks could have a negative impact on our brand image and limit our ability to penetrate new markets; |
• | fluctuations in our tax obligations and effective tax rate may result in volatility in our operating results; |
• | extreme weather conditions and the seasonal nature of our business may cause net sales to fluctuate and negatively impact our results of operations; |
• | our facilities, systems and stores, as well as the facilities and systems of our vendors and manufacturers, are vulnerable to natural disasters, pandemic disease and other unexpected events, any of which could result in an interruption to our business and adversely affect our operating results; |
• | the impact of war or acts of terrorism could have a material adverse effect on our operating results and financial condition; |
• | changes in the regulatory or compliance landscape could adversely affect our business and results of operations; |
• | our Asset-Based Revolving Credit Agreement and our Term Loan Agreement include restrictive covenants that limit our flexibility in operating our business; and, |
• | compliance with changing regulations and standards for accounting, corporate governance and public disclosure could adversely affect our business, results of operations and reported financial results. |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Period (Fiscal Month) | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (3) | ||||||||
January 29, 2017 through February 25, 2017 | 1,032 | $ | 12.07 | — | 6,503,656 | |||||||
February 26, 2017 through April 1, 2017 | 150,735 | $ | 11.79 | — | 6,503,656 | |||||||
April 2, 2017 through April 29, 2017 | 2,264 | $ | 11.40 | — | 6,503,656 | |||||||
Total | 154,031 | $ | 11.79 | — | 6,503,656 |
(1) | All of the 154,031 shares of A&F’s Common Stock purchased during the thirteen weeks ended April 29, 2017 represented shares which were withheld for tax payments due upon the exercise of employee stock appreciation rights and vesting of employee restricted stock units. |
(2) | No shares were repurchased during the thirteen weeks ended April 29, 2017 pursuant to A&F’s publicly announced stock repurchase authorization. On August 14, 2012, A&F’s Board of Directors authorized the repurchase of 10.0 million shares of A&F’s Common Stock, which was announced on August 15, 2012. |
(3) | The number shown represents, as of the end of each period, the maximum number of shares of A&F’s Common Stock that may yet be purchased under A&F’s publicly announced stock repurchase authorization described in footnote 2 above. The shares may be purchased, from time-to-time, depending on market conditions. |
Exhibit No. | Document |
10.1 | Form of Agreement entered into between Abercrombie & Fitch Management Co. and each of Joanne C. Crevoiserat and Fran Horowitz as of May 10, 2017, the execution date by Abercrombie & Fitch Management Co., incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Abercrombie & Fitch Co. dated and filed on May 12, 2017 (SEC File No. 001-12107). |
10.2 | Form of Agreement entered into between Abercrombie & Fitch Management Co. and each of Kristin Scott, Stacia Andersen and Robert E. Bostrom as of May 10, 2017, the execution date by Abercrombie & Fitch Management Co., incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Abercrombie & Fitch Co. dated and filed on May 12, 2017 (SEC File No. 001-12107). |
10.3 | Form of Director and Officer Indemnification Agreement entered into by Abercrombie & Fitch Co. with directors and officers of international subsidiaries and other key individuals on or after May 11, 2017.* |
10.4 | Summary of Compensation Structure for Non-Associate Directors of Abercrombie & Fitch Co. for Fiscal 2017.* |
10.5 | Summary of Terms of the Annual Restricted Stock Unit Grants made and to be made to the Non-Associate Directors of Abercrombie & Fitch Co. under the Abercrombie & Fitch Co. 2016 Long-Term Incentive Plan for Directors in Fiscal 2017.* |
31.1 | Certifications by Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
31.2 | Certifications by Executive Vice President, Chief Operating Officer and Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
32.1 | Certifications by Chief Executive Officer (Principal Executive Officer) and Executive Vice President, Chief Operating Officer and Chief Financial Officer (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** |
101 | The following materials from Abercrombie & Fitch Co.’s Quarterly Report on Form 10-Q for the quarterly period ended April 29, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations and Comprehensive Loss for the Thirteen Weeks Ended April 29, 2017 and April 30, 2016; (ii) Condensed Consolidated Balance Sheets at April 29, 2017 and January 28, 2017; (iii) Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks Ended April 29, 2017 and April 30, 2016; and (iv) Notes to Condensed Consolidated Financial Statements.* |
* | Filed herewith. |
** | Furnished herewith. |
ABERCROMBIE & FITCH CO. | ||
Date: June 5, 2017 | By | /s/ Joanne C. Crevoiserat |
Joanne C. Crevoiserat | ||
Executive Vice President, Chief Operating Officer and Chief Financial Officer (Principal Financial Officer and Authorized Officer) |
Exhibit No. | Document |
10.1 | Form of Agreement entered into between Abercrombie & Fitch Management Co. and each of Joanne C. Crevoiserat and Fran Horowitz as of May 10, 2017, the execution date by Abercrombie & Fitch Management Co., incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Abercrombie & Fitch Co. dated and filed on May 12, 2017 (SEC File No. 001-12107). |
10.2 | Form of Agreement entered into between Abercrombie & Fitch Management Co. and each of Kristin Scott, Stacia Andersen and Robert E. Bostrom as of May 10, 2017, the execution date by Abercrombie & Fitch Management Co., incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Abercrombie & Fitch Co. dated and filed on May 12, 2017 (SEC File No. 001-12107). |
10.3 | Form of Director and Officer Indemnification Agreement entered into by Abercrombie & Fitch Co. with directors and officers of international subsidiaries and other key individuals on or after May 11, 2017.* |
10.4 | Summary of Compensation Structure for Non-Associate Directors of Abercrombie & Fitch Co. for Fiscal 2017.* |
10.5 | Summary of Terms of the Annual Restricted Stock Unit Grants made and to be made to the Non-Associate Directors of Abercrombie & Fitch Co. under the Abercrombie & Fitch Co. 2016 Long-Term Incentive Plan for Directors in Fiscal 2017.* |
31.1 | Certifications by Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
31.2 | Certifications by Executive Vice President, Chief Operating Officer and Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
32.1 | Certifications by Chief Executive Officer (Principal Executive Officer) and Executive Vice President, Chief Operating Officer and Chief Financial Officer (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** |
101 | The following materials from Abercrombie & Fitch Co.’s Quarterly Report on Form 10-Q for the quarterly period ended April 29, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations and Comprehensive Loss for the Thirteen Weeks Ended April 29, 2017 and April 30, 2016; (ii) Condensed Consolidated Balance Sheets at April 29, 2017 and January 28, 2017; (iii) Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks Ended April 29, 2017 and April 30, 2016; and (iv) Notes to Condensed Consolidated Financial Statements.* |
* | Filed herewith. |
** | Furnished herewith. |
ABERCROMBIE & FITCH CO. | ||
6301 Fitch Path | ||
New Albany, Ohio 43054 | ||
By: | ||
Arthur Martinez | ||
Executive Chairman of the Board | ||
Date: | ||
INSERT INDEMNITEE NAME | ||
INSERT ADDRESS | ||
INSERT ADDRESS | ||
By: | ||
INSERT INDEMNITEE NAME | ||
Date: |
[Indemnitee] | ||
• | an annual cash retainer of $65,000 for Board service (paid quarterly in arrears); |
• | an additional annual cash retainer for each standing committee Chair and member of $25,000 and $12,500, respectively, other than: (i) the Chair and the members of the Audit and Finance Committee who are to receive an additional annual cash retainer of $40,000 and $25,000, respectively, for serving in those capacities; (ii) the Chair of the Compensation and Organization Committee who is to receive an additional annual cash retainer of $30,000 for serving in that capacity; (iii) the Lead Independent Director of the Company who is to receive an additional annual cash retainer of $25,000 for serving in that capacity, effective as of March 27, 2017; and (iv) the Chair and the members of the Executive Committee who are to receive no additional compensation for services rendered as members of the Executive Committee. In each case, the retainers are to be paid quarterly in arrears; and |
• | an annual grant of restricted stock units (“RSUs”), to be granted on the date of the annual meeting of stockholders of the Company (if the non-associate directors continue to serve after the annual meeting of stockholders) pursuant to the Abercrombie & Fitch Co. 2016 Long‑Term Incentive Plan for Directors (or any successor plan approved by the Company’s stockholders), and which will vest on the earlier of (i) the first anniversary of the grant date or (ii) the date of the next regularly scheduled annual meeting of stockholders of the Company after the grant date; in each case, subject to earlier vesting in the event of a non-associate director’s death or total disability or upon a change of control of the Company. |
• | an additional annual cash retainer of $200,000 (the “Non-Executive Chairman Cash Retainer”), paid quarterly in arrears; and |
• | an additional annual grant of RSUs, with the market value of the underlying shares of Common Stock on the grant date being $100,000 (the “Non-Executive Chairman RSU Retainer”). |
• | RSUs were granted on the date of the 2016 Annual Meeting of Stockholders of the Company (the “2016 Annual Meeting”) pursuant to the Abercrombie & Fitch Co. 2016 Long‑Term Incentive Plan for Directors; and |
• | all of the RSUs granted will vest on the date of the 2017 Annual Meeting, subject to earlier vesting in the event of Mr. Martinez’s death or total disability or upon a change of control of the Company. |
• | an additional annual cash retainer of $625,000 (the “Original Executive Chairman Cash Retainer”), paid quarterly in arrears; and |
• | an additional annual grant of RSUs, with the market value of the underlying shares of Common Stock on the grant date being $1,875,000 (the “Original Executive Chairman RSU Retainer”). |
• | an annual cash retainer of $500,000 (the “New Executive Chairman Cash Retainer”), to be paid quarterly in arrears. The New Executive Chairman Cash Retainer to be received by Mr. Martinez for the period of time between February 1, 2017 and June 15, 2017 will be based on the portion of a full year that such period of time represents; and |
• | an annual grant of RSUs, with the market value of the shares of Common Stock underlying the annual grant to be $1,000,000 on the grant date (the “New Executive Chairman RSU Retainer”). Effective April 3, 2017, Mr. Martinez was granted a pro-rated New Executive Chairman RSU Retainer that: (i) was based on the portion of a full year that the period of time between February 1, 2017 and June 15, 2017 represents (or 32,318 RSUs with a market value of $367,132) and (ii) will vest on the earlier of (a) the first anniversary of the grant date or (b) the date of the next regularly scheduled annual meeting of stockholders of the Company after the grant date; in each case, subject to earlier vesting in the event of Mr. Martinez’s death or total disability or upon a change of control of the Company. |
• | RSUs representing the full amount of the New Executive Chairman RSU Retainer are to be granted on the date of the annual meeting of stockholders of the Company (if Mr. Martinez continues to serve after the annual meeting of stockholders); and |
• | RSUs will vest on the earlier of (i) the first anniversary of the grant date or (ii) the date of the next regularly scheduled annual meeting of stockholders of the Company after the grant date; in each case, subject to earlier vesting in the event of Mr. Martinez’s death or total disability or upon a change of control of the Company. |
• | RSUs are to be granted annually on the date of the annual meeting of stockholders of the Company (if the non-associate directors continue to serve after the annual meeting of stockholders) pursuant to the Abercrombie & Fitch Co. 2016 Long-Term Incentive Plan for Directors or a successor plan approved by the Company’s stockholders; and |
• | RSUs will vest on the earlier of (i) the first anniversary of the grant date or (ii) the date of the next regularly scheduled annual meeting of stockholders of the Company after the grant date, subject to earlier vesting in the event of a non-associate director’s death or total disability or upon a change of control of the Company. |
• | RSUs were granted on the date of the 2016 Annual Meeting of Stockholders of the Company (the “2016 Annual Meeting”) pursuant to the Abercrombie & Fitch Co. 2016 Long‑Term Incentive Plan for Directors; and |
• | All of the RSUs granted will vest on the date of the 2017 Annual Meeting of Stockholders (the “2017 Annual Meeting”), subject to earlier vesting in the event of Mr. Martinez’s death or total disability or upon a change of control of the Company. |
• | RSUs representing the full amount of the New Executive Chairman RSU Retainer are to be granted on the date of the annual meeting of stockholders of the Company (if Mr. Martinez continues to serve after the annual meeting of stockholders); and |
• | RSUs will vest on the earlier of (i) the first anniversary of the grant date or (ii) the date of the next regularly scheduled annual meeting of stockholders of the Company after the grant date; in each case, subject to earlier vesting in the event of Mr. Martinez’s death or total disability or upon a change of control of the Company. |
1. | I have reviewed this Quarterly Report on Form 10-Q of Abercrombie & Fitch Co. for the quarterly period ended April 29, 2017; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
ABERCROMBIE & FITCH CO. | ||
Date: June 5, 2017 | By: | /s/ Fran Horowitz |
Fran Horowitz | ||
Chief Executive Officer | ||
(Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Abercrombie & Fitch Co. for the quarterly period ended April 29, 2017; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
ABERCROMBIE & FITCH CO. | ||
Date: June 5, 2017 | By: | /s/ Joanne C. Crevoiserat |
Joanne C. Crevoiserat | ||
Executive Vice President, Chief Operating Officer and Chief Financial Officer | ||
(Principal Financial Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Corporation and its subsidiaries. |
/s/ Fran Horowitz | /s/ Joanne C. Crevoiserat | |
Fran Horowitz Chief Executive Officer (Principal Executive Officer) | Joanne C. Crevoiserat Executive Vice President, Chief Operating Officer and Chief Financial Officer (Principal Financial Officer) | |
Dated: June 5, 2017 | Dated: June 5, 2017 |
* | These certifications are being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. These certifications shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Corporation specifically incorporates these certifications by reference in such filing. |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Apr. 29, 2017 |
Jun. 01, 2017 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | ABERCROMBIE & FITCH CO /DE/ | |
Entity Central Index Key | 0001018840 | |
Current Fiscal Year End Date | --02-03 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Apr. 29, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Common Stock, Shares Outstanding | 86,016,786 |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Apr. 29, 2017 |
Jan. 28, 2017 |
---|---|---|
Stockholders’ equity | ||
Treasury Stock, at Average Cost (in shares) | 35,288,000 | 35,542,000 |
Class A Common Stock | ||
Stockholders’ equity | ||
Class A Common Stock, par value | $ 0.01 | $ 0.01 |
Class A Common Stock, shares authorized | 150,000,000 | 150,000,000 |
Class A Common Stock, shares issued | 103,300,000 | 103,300,000 |
Basis of Presentation |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 29, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION | BASIS OF PRESENTATION Nature of Business Abercrombie & Fitch Co. (“A&F”), through its subsidiaries (collectively, A&F and its subsidiaries are referred to as “Abercrombie & Fitch” or the “Company”), is a specialty retailer of branded apparel and accessories. The Company operates through store and direct-to-consumer operations, as well as through various wholesale, franchise and licensing arrangements. The Company has operations in North America, Europe, Asia and the Middle East. Principles of Consolidation The accompanying Condensed Consolidated Financial Statements include historical financial statements of, and transactions applicable to, the Company and reflect its assets, liabilities, results of operations and cash flows. The Company has interests in a United Arab Emirates business venture and in a Kuwait business venture with Majid al Futtaim Fashion L.L.C. (“MAF”), each of which meets the definition of a variable interest entity (“VIE”). The Company is deemed to be the primary beneficiary of these VIEs; therefore, the Company has consolidated the assets, liabilities, results of operations and cash flows of these VIEs. Fiscal Year The Company’s fiscal year ends on the Saturday closest to January 31. All references herein to “Fiscal 2017” and “Fiscal 2016” represent the fifty-three week fiscal year ending on February 3, 2018 and the fifty-two week fiscal year ended on January 28, 2017, respectively. Interim Financial Statements The Condensed Consolidated Financial Statements as of April 29, 2017, and for the thirteen week periods ended April 29, 2017 and April 30, 2016, are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto contained in A&F’s Annual Report on Form 10-K for Fiscal 2016 filed with the SEC on March 27, 2017. The January 28, 2017 consolidated balance sheet data, included herein, were derived from audited consolidated financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments (which are of a normal recurring nature) necessary to state fairly, in all material respects, the financial position and results of operations and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for Fiscal 2017. Recent Accounting Pronouncements The following table provides a brief description of recent accounting pronouncements that could affect the Company’s financial statements:
* Early adoption is permitted. |
Net Loss Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NET LOSS PER SHARE | NET LOSS PER SHARE Net loss per basic and diluted share is computed based on the weighted-average number of outstanding shares of common stock. The following table presents weighted-average shares outstanding and anti-dilutive shares:
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Fair Value |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE | FAIR VALUE Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The inputs used to measure fair value are prioritized based on a three-level hierarchy. The three levels of inputs to measure fair value are as follows:
The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. The three levels of the hierarchy and the distribution within it of the Company’s assets and liabilities, which are measured at fair value on a recurring basis, were as follows:
The Level 2 assets and liabilities consist of trust-owned life insurance policies and derivative financial instruments, primarily foreign currency exchange forward contracts. The fair value of foreign currency exchange forward contracts is determined by using quoted market prices of the same or similar instruments, adjusted for counterparty risk. Fair value of borrowings: The Company’s borrowings under the Company’s credit facilities are carried at historical cost in the accompanying Condensed Consolidated Balance Sheets. For disclosure purposes, the Company estimated the fair value of borrowings outstanding based on market rates for similar types of debt, which are considered to be Level 2 inputs. The carrying amount and fair value of the Company’s term loan facility were as follows:
No borrowings were outstanding under the Company’s senior secured revolving credit facility as of April 29, 2017 or January 28, 2017. |
Property and Equipment, Net |
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Apr. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT, NET | PROPERTY AND EQUIPMENT, NET Property and equipment, net consisted of:
Long-lived assets, primarily comprised of leasehold improvements, furniture, fixtures and equipment, are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the long-lived assets might not be recoverable. These include, but are not limited to, material declines in operational performance, a history of losses, an expectation of future losses, adverse market conditions and store closure or relocation decisions. On at least a quarterly basis, the Company reviews for indicators of impairment at the individual store level, the lowest level for which cash flows are identifiable. Stores that display an indicator of impairment are subjected to an impairment assessment. The Company’s impairment assessment requires management to make assumptions and judgments related, but not limited, to management’s expectations for future operations and projected cash flows. The key assumptions used in the Company’s undiscounted future cash flow models include sales, gross profit and, to a lesser extent, operating expenses. An impairment loss would be recognized when these undiscounted future cash flows are less than the carrying amount of the asset group. In the circumstance of impairment, the loss would be measured as the excess of the carrying amount of the asset group over its fair value. The key assumptions used in estimating the fair value of impaired assets include projected cash flows and discount rate. The Company incurred asset impairment charges of $0.7 million for the thirteen weeks ended April 29, 2017. There were no asset impairment charges for the thirteen weeks ended April 30, 2016. The Company had $35.9 million and $35.6 million of construction project assets in property and equipment, net at April 29, 2017 and January 28, 2017, respectively, related to the construction of buildings in certain lease arrangements where the Company is deemed to be the owner of the construction project. |
Income Taxes |
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Apr. 29, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company’s quarterly tax provision and the estimate of the annual effective tax rate are subject to significant variation due to several factors. These include variability in the pre-tax jurisdictional mix of earnings, changes in how the Company does business including entering into new businesses or geographies, changes in foreign currency exchange rates, changes in law, regulations, and administrative practices, relative changes of expenses or losses for which tax benefits are not recognized and the impact of discrete items. The impact of these items on the effective tax rate will be greater at lower levels of pre-tax income (loss). In the first quarter of Fiscal 2017, the provision for income taxes also differs from the tax computed at the U.S. federal statutory tax rate due to the tax effects of stock-based compensation. In the first quarter of Fiscal 2017, the Company adopted ASU 2016-09, “Compensation—Stock Compensation,” which resulted in a discrete non-cash income tax charge of $9.3 million recognized in income tax benefit on the Condensed Consolidated Statements of Operations and Comprehensive Loss. Refer to Note 1, “BASIS OF PRESENTATION--Recent Accounting Pronouncements” for further discussion regarding the adoption of this standard. |
Share-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION The Company recognized share-based compensation expense of $4.9 million for the thirteen weeks ended April 29, 2017 and $6.6 million for the thirteen weeks ended April 30, 2016. The tax benefit associated with share-based compensation expense was $1.9 million for the thirteen weeks ended April 29, 2017 and $2.5 million for the thirteen weeks ended April 30, 2016. Stock Options The following table summarizes stock option activity for the thirteen weeks ended April 29, 2017:
Stock Appreciation Rights The following table summarizes stock appreciation rights activity for the thirteen weeks ended April 29, 2017:
As of April 29, 2017, there was $2.1 million of total unrecognized compensation cost, net of estimated forfeitures, related to stock appreciation rights. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 11 months. The grant date fair value of stock appreciation rights that vested during the thirteen weeks ended April 29, 2017 and April 30, 2016 was $1.9 million and $3.7 million, respectively. Restricted Stock Units The following table summarizes activity for restricted stock units for the thirteen weeks ended April 29, 2017:
Fair value of both service-based and performance-based restricted stock units is calculated using the market price of the underlying common stock on the date of grant reduced for anticipated dividend payments on unvested shares. In determining fair value, the Company does not take into account performance-based vesting requirements. Performance-based vesting requirements are taken into account in determining the number of awards expected to vest. For market-based restricted stock units, fair value is calculated using a Monte Carlo simulation with the number of shares that ultimately vest dependent on the Company’s total stockholder return measured against the total stockholder return of a select group of peer companies over a three-year period. For an award with performance-based or market-based vesting requirements, the number of shares that ultimately vest can vary from 0% to 200% of target depending on the level of achievement of performance criteria. Unvested shares related to restricted stock units with performance-based vesting conditions are reflected at 100% of their target vesting amount in the table above. Service-based restricted stock units are expensed on a straight-line basis over the total requisite service period, net of forfeitures. Performance-based restricted stock units subject to graded vesting are expensed on an accelerated attribution basis, net of forfeitures. Market-based restricted stock units without graded vesting features are expensed on a straight-line basis over the requisite service period, net of forfeitures. As of April 29, 2017, there was $30.1 million, $4.9 million and $4.8 million of total unrecognized compensation cost, net of estimated forfeitures, related to service-based, performance-based and market-based restricted stock units, respectively. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 17 months, 18 months and 16 months for service-based, performance-based and market-based restricted stock units, respectively. The tax benefit associated with restricted stock vesting during the thirteen weeks ended April 29, 2017 and April 30, 2016 was $2.1 million and $4.9 million, respectively. Additional information pertaining to restricted stock units for the thirteen weeks ended April 29, 2017 and April 30, 2016 follows:
The weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the thirteen weeks ended April 29, 2017 and April 30, 2016 were as follows:
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Derivative Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS The Company is exposed to risks associated with changes in foreign currency exchange rates and uses derivative instruments, primarily forward contracts, to manage the financial impacts of these exposures. The Company does not use forward contracts to engage in currency speculation and does not enter into derivative financial instruments for trading purposes. The Company uses derivative instruments, primarily forward contracts designated as cash flow hedges, to hedge the foreign currency exposure associated with forecasted foreign-currency-denominated intercompany inventory sales to foreign subsidiaries and the related settlement of the foreign-currency-denominated intercompany receivables. Fluctuations in exchange rates will either increase or decrease the Company’s intercompany equivalent cash flows and affect the Company’s U.S. Dollar earnings. Gains or losses on the foreign currency exchange forward contracts that are used to hedge these exposures are expected to partially offset this variability. Foreign currency exchange forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed upon settlement date. These forward contracts typically have a maximum term of twelve months. The sale of the inventory to the Company’s customers will result in the reclassification of related derivative gains and losses that are reported in accumulated other comprehensive loss (“AOCL”). Substantially all of the unrealized gains or losses related to designated cash flow hedges as of April 29, 2017 will be recognized in cost of sales, exclusive of depreciation and amortization, over the next twelve months. The Company presents its derivative assets and derivative liabilities at their gross fair values on the Condensed Consolidated Balance Sheets. However, the Company's Master International Swap Dealers Association, Inc., Agreement and other similar arrangements allow net settlements under certain conditions. As of April 29, 2017, the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge either a portion, or all, of forecasted foreign-currency-denominated intercompany inventory sales, the resulting settlement of the foreign-currency-denominated intercompany accounts receivable, or both:
The Company also uses foreign currency exchange forward contracts to hedge certain foreign-currency-denominated net monetary assets/liabilities. Examples of monetary assets/liabilities include cash balances, receivables and payables. Fluctuations in exchange rates result in transaction gains/(losses) being recorded in earnings as U.S. GAAP requires that monetary assets/liabilities be remeasured at the spot exchange rate at quarter-end or upon settlement. The Company has chosen not to apply hedge accounting to these instruments because there are no differences in the timing of gain or loss recognition on the hedging instruments and the hedged items. As of April 29, 2017, the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge foreign-currency-denominated net monetary assets/liabilities:
The location and amounts of derivative fair values on the Condensed Consolidated Balance Sheets as of April 29, 2017 and January 28, 2017 were as follows:
Refer to Note 3, “FAIR VALUE,” for further discussion of the determination of the fair value of derivative instruments. The location and amounts of derivative gains and losses for the thirteen weeks ended April 29, 2017 and April 30, 2016 on the Condensed Consolidated Statements of Operations and Comprehensive Loss were as follows:
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Accumulated Other Comprehensive Loss |
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Apr. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | ACCUMULATED OTHER COMPREHENSIVE LOSS The activity in accumulated other comprehensive loss for the thirteen weeks ended April 29, 2017 was as follows:
The activity in accumulated other comprehensive loss for the thirteen weeks ended April 30, 2016 was as follows:
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Segment Reporting |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT REPORTING | SEGMENT REPORTING The Company has two operating segments: Hollister; and Abercrombie, which includes the Company’s Abercrombie & Fitch and abercrombie kids brands. These operating segments have similar economic characteristics, classes of consumers, products, and production and distribution methods, and have been aggregated into one reportable segment. The following table provides the Company’s net sales by operating segment for the thirteen weeks ended April 29, 2017 and April 30, 2016.
The following table provides the Company’s net sales by geographic area for the thirteen weeks ended April 29, 2017 and April 30, 2016.
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Contingencies |
3 Months Ended |
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Apr. 29, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
CONTINGENCIES | CONTINGENCIES The Company is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business. Legal costs incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, and the Company establishes reserves for the outcome of litigation where losses are deemed probable and reasonably estimable. The Company’s assessment of the current exposure could change in the event of the discovery of additional facts. Actual liabilities may exceed the amounts reserved, and there can be no assurance that final resolution of these matters will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows. There are certain claims and legal proceedings pending against the Company for which accruals have not been established. |
Basis of Presentation Nature of Business (Policies) |
3 Months Ended |
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Apr. 29, 2017 | |
Basis of Presentation [Abstract] | |
Nature of Business [Text Block] | Nature of Business Abercrombie & Fitch Co. (“A&F”), through its subsidiaries (collectively, A&F and its subsidiaries are referred to as “Abercrombie & Fitch” or the “Company”), is a specialty retailer of branded apparel and accessories. The Company operates through store and direct-to-consumer operations, as well as through various wholesale, franchise and licensing arrangements. The Company has operations in North America, Europe, Asia and the Middle East. |
Basis of Presentation Principles of Consolidation (Policies) |
3 Months Ended |
---|---|
Apr. 29, 2017 | |
Basis of Presentation [Abstract] | |
Consolidation, Policy [Policy Text Block] | Principles of Consolidation The accompanying Condensed Consolidated Financial Statements include historical financial statements of, and transactions applicable to, the Company and reflect its assets, liabilities, results of operations and cash flows. The Company has interests in a United Arab Emirates business venture and in a Kuwait business venture with Majid al Futtaim Fashion L.L.C. (“MAF”), each of which meets the definition of a variable interest entity (“VIE”). The Company is deemed to be the primary beneficiary of these VIEs; therefore, the Company has consolidated the assets, liabilities, results of operations and cash flows of these VIEs. |
Basis of Presentation Fiscal Years (Policies) |
3 Months Ended |
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Apr. 29, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Fiscal Period, Policy [Policy Text Block] | Fiscal Year The Company’s fiscal year ends on the Saturday closest to January 31. All references herein to “Fiscal 2017” and “Fiscal 2016” represent the fifty-three week fiscal year ending on February 3, 2018 and the fifty-two week fiscal year ended on January 28, 2017, respectively. |
Contingencies (Policies) |
3 Months Ended |
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Apr. 29, 2017 | |
Loss Contingencies [Line Items] | |
Contingent Liability Reserve Estimate, Policy [Policy Text Block] | The Company is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business. Legal costs incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, and the Company establishes reserves for the outcome of litigation where losses are deemed probable and reasonably estimable. The Company’s assessment of the current exposure could change in the event of the discovery of additional facts. Actual liabilities may exceed the amounts reserved, and there can be no assurance that final resolution of these matters will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows. There are certain claims and legal proceedings pending against the Company for which accruals have not been established. |
Basis of Presentation Recent Accounting Pronouncements (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 29, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block] | The following table provides a brief description of recent accounting pronouncements that could affect the Company’s financial statements:
* Early adoption is permitted. |
Net Loss Per Share (Table) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Weighted Average Number of Shares | The following table presents weighted-average shares outstanding and anti-dilutive shares:
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Fair Value (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Company's Assets and Liabilities Measured at Fair Value | The three levels of the hierarchy and the distribution within it of the Company’s assets and liabilities, which are measured at fair value on a recurring basis, were as follows:
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Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques [Table Text Block] | The carrying amount and fair value of the Company’s term loan facility were as follows:
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Property and Equipment, Net (Tables) |
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Apr. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment, Net | Property and equipment, net consisted of:
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Share-Based Compensation (Tables) |
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Apr. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Option Activity | The following table summarizes stock option activity for the thirteen weeks ended April 29, 2017:
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Schedule of Stock Appreciation Rights Activity | The following table summarizes stock appreciation rights activity for the thirteen weeks ended April 29, 2017:
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Schedule of Restricted Stock Unit Activity | The following table summarizes activity for restricted stock units for the thirteen weeks ended April 29, 2017:
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Market-based restricted stock units [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Weighted-Average Estimated Fair Value and Assumptions of Restricted Stock Units with Market Vesting Conditions | The weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the thirteen weeks ended April 29, 2017 and April 30, 2016 were as follows:
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Derivative Instruments (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Foreign Exchange Forward Contracts | As of April 29, 2017, the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge either a portion, or all, of forecasted foreign-currency-denominated intercompany inventory sales, the resulting settlement of the foreign-currency-denominated intercompany accounts receivable, or both:
The Company also uses foreign currency exchange forward contracts to hedge certain foreign-currency-denominated net monetary assets/liabilities. Examples of monetary assets/liabilities include cash balances, receivables and payables. Fluctuations in exchange rates result in transaction gains/(losses) being recorded in earnings as U.S. GAAP requires that monetary assets/liabilities be remeasured at the spot exchange rate at quarter-end or upon settlement. The Company has chosen not to apply hedge accounting to these instruments because there are no differences in the timing of gain or loss recognition on the hedging instruments and the hedged items. As of April 29, 2017, the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge foreign-currency-denominated net monetary assets/liabilities:
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Location and Amounts of Derivative Fair Values on the Condensed Consolidated Balance Sheets | The location and amounts of derivative fair values on the Condensed Consolidated Balance Sheets as of April 29, 2017 and January 28, 2017 were as follows:
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Location and Amounts of Derivative Gains and Losses on the Condensed Consolidated Statements of Operations and Comprehensive Loss | The location and amounts of derivative gains and losses for the thirteen weeks ended April 29, 2017 and April 30, 2016 on the Condensed Consolidated Statements of Operations and Comprehensive Loss were as follows:
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Accumulated Other Comprehensive Loss (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Loss | The activity in accumulated other comprehensive loss for the thirteen weeks ended April 29, 2017 was as follows:
The activity in accumulated other comprehensive loss for the thirteen weeks ended April 30, 2016 was as follows:
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Segment Reporting (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from External Customers by Operating Segment [Table Text Block] | The following table provides the Company’s net sales by operating segment for the thirteen weeks ended April 29, 2017 and April 30, 2016.
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Revenue from External Customers by Geographic Areas [Table Text Block] | The following table provides the Company’s net sales by geographic area for the thirteen weeks ended April 29, 2017 and April 30, 2016.
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Net Loss Per Share (Details) - shares shares in Thousands |
3 Months Ended | |||
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Apr. 29, 2017 |
Apr. 30, 2016 |
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Weighted Average Shares Outstanding And Anti Dilutive Shares [Abstract] | ||||
Shares of common stock issued | 103,300 | 103,300 | ||
Weighted-average treasury shares | (35,227) | (35,675) | ||
Weighted-average — basic shares | 68,073 | 67,625 | ||
Dilutive effect of share-based compensation awards | 0 | 0 | ||
Weighted-average — diluted shares | 68,073 | 67,625 | ||
Anti-dilutive shares (1) | [1] | 5,263 | 7,954 | |
|
Property and Equipment, Net (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Apr. 29, 2017 |
Apr. 30, 2016 |
Jan. 28, 2017 |
|
Property, Plant and Equipment [Line Items] | |||
Property and equipment, at cost | $ 2,766,557 | $ 2,772,139 | |
Less: Accumulated depreciation and amortization | (1,960,500) | (1,947,401) | |
Property and equipment, net | 806,057 | 824,738 | |
Asset Impairment Charges | 730 | $ 0 | |
Construction Project Assets [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, net | $ 35,900 | $ 35,600 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 29, 2017 |
Apr. 30, 2016 |
|
Income Tax Disclosure [Abstract] | ||
Net tax deficit on share-based compensation | $ 9,264 | $ 951 |
Share-Based Compensation (Restricted Stock Units Assumptions) (Details) - Market-based restricted stock units [Member] |
3 Months Ended | |
---|---|---|
Apr. 29, 2017
$ / shares
|
Apr. 30, 2016
$ / shares
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Grant date market price (in dollars per share) | $ 11.43 | $ 31.67 |
Fair value (in dollars per share) | $ 11.79 | $ 38.22 |
Price volatility | 47.00% | 44.00% |
Expected term (years) | 2 years 10 months 24 days | 2 years 9 months 18 days |
Risk-free interest rate | 1.50% | 1.10% |
Dividend yield | 7.00% | 2.50% |
Average volatility of peer companies | 35.20% | 34.40% |
Average correlation coefficient of peer companies | 0.2664 | 0.3382 |
Derivative Instruments (Outstanding Foreign Exchange Forward Contracts) (Details) - Cash Flow Hedging - Forward Contracts $ in Thousands |
Apr. 29, 2017
USD ($)
|
[1] | ||
---|---|---|---|---|
Inter-company Inventory and Accounts Receivables [Member] | Euro Member Countries, Euro | ||||
Derivative [Line Items] | ||||
Notional Amount | $ 81,038 | |||
Inter-company Inventory and Accounts Receivables [Member] | United Kingdom, Pounds | ||||
Derivative [Line Items] | ||||
Notional Amount | 30,243 | |||
Inter-company Inventory and Accounts Receivables [Member] | Canada, Dollars | ||||
Derivative [Line Items] | ||||
Notional Amount | 15,119 | |||
Inter-company Inventory and Accounts Receivables [Member] | Japan, Yen | ||||
Derivative [Line Items] | ||||
Notional Amount | 7,934 | |||
Assets and Liabilities | Euro Member Countries, Euro | ||||
Derivative [Line Items] | ||||
Notional Amount | 13,895 | |||
Assets and Liabilities | United Kingdom, Pounds | ||||
Derivative [Line Items] | ||||
Notional Amount | $ 1,283 | |||
|
Derivative Instruments (Derivative Fair Values on the Condensed Consolidated Balance Sheets) (Details) - USD ($) $ in Thousands |
Apr. 29, 2017 |
Jan. 28, 2017 |
---|---|---|
Foreign currency exchange forward contracts | Other current assets | Designated As Hedging Instrument | ||
The location and amounts of derivative fair values on the Condensed Consolidated Balance Sheets | ||
Other current assets | $ 2,415 | $ 5,920 |
Foreign currency exchange forward contracts | Other current assets | Not Designated as Hedging Instruments | ||
The location and amounts of derivative fair values on the Condensed Consolidated Balance Sheets | ||
Other current assets | 0 | 122 |
Foreign currency exchange forward contracts | Accrued expenses | Designated As Hedging Instrument | ||
The location and amounts of derivative fair values on the Condensed Consolidated Balance Sheets | ||
Accrued expenses | 1,226 | 486 |
Foreign currency exchange forward contracts | Accrued expenses | Not Designated as Hedging Instruments | ||
The location and amounts of derivative fair values on the Condensed Consolidated Balance Sheets | ||
Accrued expenses | 17 | 6 |
Fair Value, Measurements, Recurring | ||
The location and amounts of derivative fair values on the Condensed Consolidated Balance Sheets | ||
Other current assets | 2,415 | 6,042 |
Accrued expenses | 1,243 | 492 |
Level 2 | Fair Value, Measurements, Recurring | ||
The location and amounts of derivative fair values on the Condensed Consolidated Balance Sheets | ||
Other current assets | 2,415 | 6,042 |
Accrued expenses | $ 1,243 | $ 492 |
Derivative Instruments (Derivative Gains (Losses) on the Condensed Consolidated Statement of Operations) (Details) - Foreign currency exchange forward contracts - USD ($) $ in Thousands |
3 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
Apr. 29, 2017 |
Apr. 30, 2016 |
||||||||
Cash Flow Hedging | |||||||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||||||
Amount of Gain (Loss) Recognized in OCI on Derivative Contracts (Effective Portion) | [1] | $ (1,373) | $ (9,382) | ||||||
Other operating income, net | |||||||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||||||
Gain/(Loss) | 28 | (1,777) | |||||||
Other operating income, net | Cash Flow Hedging | |||||||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||||||
Amount of Gain Recognized in Earnings on Derivative Contracts (Ineffective Portion and Amount Excluded from Effectiveness Testing) | [2] | 528 | 355 | ||||||
Cost of sales, exclusive of depreciation and amortization | Cash Flow Hedging | |||||||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||||||
Amount of Gain (Loss) Reclassified from AOCL into Earnings (Effective Portion) | [3] | $ 3,535 | $ 2,305 | ||||||
|
Derivative Instruments (Details) - USD ($) $ in Thousands |
3 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Apr. 29, 2017 |
Apr. 30, 2016 |
Jan. 28, 2017 |
||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Length of time inventory sales hedged (in months) | 12 months | |||||||||
Period in which remaining unrealized gains or losses on intercompany inventory sales are recognized | 12 months | |||||||||
Foreign currency exchange forward contracts | Cash Flow Hedging | ||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Derivative Instruments, Gain (Loss) Recognized in OCI, Effective Portion, Net | [1] | $ (1,373) | $ (9,382) | |||||||
Foreign currency exchange forward contracts | Cost of sales, exclusive of depreciation and amortization | Cash Flow Hedging | ||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net | [2] | 3,535 | 2,305 | |||||||
Foreign currency exchange forward contracts | Other operating income, net | Cash Flow Hedging | ||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Amount of Gain Recognized in Earnings, Ineffective Portion and Amount Excluded from Effectiveness Testing, Net | [3] | 528 | $ 355 | |||||||
Fair Value, Measurements, Recurring | ||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Other current assets | 2,415 | $ 6,042 | ||||||||
Accrued expenses | 1,243 | 492 | ||||||||
Level 2 | Fair Value, Measurements, Recurring | ||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Other current assets | 2,415 | 6,042 | ||||||||
Accrued expenses | $ 1,243 | $ 492 | ||||||||
|
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands |
3 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Apr. 29, 2017 |
Apr. 30, 2016 |
|||||||
Accumulated Other Comprehensive Loss [Roll Forward] | ||||||||
Beginning balance at January 28, 2017 | $ (121,302) | $ (114,619) | ||||||
Other comprehensive income (loss) before reclassifications | 4,234 | 16,278 | ||||||
Reclassified from accumulated other comprehensive loss (1) | (3,535) | [1] | (2,305) | [2] | ||||
Tax effect | 308 | (3,503) | ||||||
Other comprehensive income | 1,007 | 10,470 | ||||||
Ending balance at April 29, 2017 | (120,295) | (104,149) | ||||||
Foreign Currency Translation Adjustment | ||||||||
Accumulated Other Comprehensive Loss [Roll Forward] | ||||||||
Beginning balance at January 28, 2017 | (126,127) | (119,196) | ||||||
Other comprehensive income (loss) before reclassifications | 5,607 | 25,660 | ||||||
Reclassified from accumulated other comprehensive loss (1) | 0 | 0 | ||||||
Tax effect | 0 | (5,235) | ||||||
Other comprehensive income | 5,607 | 20,425 | ||||||
Ending balance at April 29, 2017 | (120,520) | (98,771) | ||||||
Unrealized Gain (Loss) on Derivative Financial Instruments | ||||||||
Accumulated Other Comprehensive Loss [Roll Forward] | ||||||||
Beginning balance at January 28, 2017 | 4,825 | 4,577 | ||||||
Other comprehensive income (loss) before reclassifications | (1,373) | (9,382) | ||||||
Reclassified from accumulated other comprehensive loss (1) | (3,535) | (2,305) | ||||||
Tax effect | 308 | 1,732 | ||||||
Other comprehensive income | (4,600) | (9,955) | ||||||
Ending balance at April 29, 2017 | $ 225 | $ (5,378) | ||||||
|
Segment Reporting (Segment Reporting Information, by Segment) (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 29, 2017
USD ($)
|
Apr. 30, 2016
USD ($)
|
|
Segment Reporting Information [Line Items] | ||
Number of Operating Segments | 2 | |
Number of reportable segments | 1 | |
Net Sales | $ 661,099 | $ 685,483 |
Segment Reporting (Net Sales by Brand) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 29, 2017 |
Apr. 30, 2016 |
|
Schedule of Revenue by Brand [Line Items] | ||
Net Sales | $ 661,099 | $ 685,483 |
Hollister | ||
Schedule of Revenue by Brand [Line Items] | ||
Net Sales | 374,677 | 362,147 |
Abercrombie | ||
Schedule of Revenue by Brand [Line Items] | ||
Net Sales | $ 286,422 | $ 323,336 |
Segment Reporting (Sales by Geographic Area) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 29, 2017 |
Apr. 30, 2016 |
|
Net Sales | $ 661,099 | $ 685,483 |
United States | ||
Net Sales | 409,068 | 425,429 |
Europe | ||
Net Sales | 154,984 | 161,457 |
Other | ||
Net Sales | $ 97,047 | $ 98,597 |
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