Financial Data and Key Metrics Changes - Total company sales declined 7% year-over-year, down 4% on a constant currency basis [9][26] - Gross profit rate decreased to 57.9% from 65.2% last year, impacted by higher product costs and adverse exchange rates [28] - Net loss per share was 1.70 last year [30] Business Line Data and Key Metrics Changes - Abercrombie brands, including kids, grew 5% year-over-year, or 7% on a constant currency basis, while Hollister brands declined 15% or 12% on a constant currency basis [26][27] - Abercrombie Adults achieved its best Q2 sales since 2015, with the highest Q2 average unit retail (AUR) since 2005 [9] - Women's category at Abercrombie delivered its best Q2 sales in AUR since 2008, while men's results showed the highest Q2 AUR since 2013 [10] Market Data and Key Metrics Changes - Net sales decreased 4% in the U.S. and declined 14% internationally, with EMEA down 13% and APAC down 33% on a reported basis [27] - In EMEA, strength in the U.K. and Middle East was offset by softness in Western Europe, particularly Germany and France [50] Company Strategy and Development Direction - The company is focused on three strategic principles: brand growth, digital revolution, and financial discipline [6][21] - Plans to open around 60 new stores in 2022, with a focus on smaller formats and updated store designs [17][32] - The company aims to achieve sales of 4.3 billion and a sustainable operating margin rate at or above 8% by the end of fiscal 2025 [23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing inflationary pressures impacting consumer behavior, particularly for the Hollister brand [21][23] - There is cautious optimism regarding the moderation of inflation and product costs in the future [35] - The company is committed to executing its long-term goals despite current challenges [25][35] Other Important Information - Inventory levels increased by 70% year-over-year, with 92% classified as current [14][29] - The company repurchased 1 million shares for approximately $18 million during the quarter [31] Q&A Session Summary Question: How are you planning for inventory levels and product costs? - Management highlighted that 92% of inventory is current, with significant in-transit units due to last year's low inventory levels [38][39] Question: Can you discuss trends in back-to-school shopping? - Abercrombie is seeing growth in key categories like jeans and dresses, while Hollister has shifted from bottoms to tops [42] Question: What is the outlook for the Hollister brand? - Management acknowledged the brand's recent underperformance due to macro pressures and a shift in consumer behavior, but remains confident in its future [48][49] Question: How are you addressing inventory management going forward? - The company plans to reduce receipts and focus on trending categories to ensure inventory turns appropriately [58] Question: What are your thoughts on freight costs and sales progression? - Management is optimistic about freight costs becoming a tailwind and noted consistent strength in Abercrombie sales throughout the quarter [63][65]
A&F(ANF) - 2022 Q2 - Earnings Call Transcript