Abercrombie & Fitch reports 64% jump in fiscal Q2 earnings
Abercrombie & Fitch Co. reported unaudited results which reflected net income of $32.0 million and net income per diluted share of $0.35 for the thirteen weeks ended July 30, 2011, compared to net income of $19.5 million and net income per diluted share of $0.22 for the thirteen weeks ended July 31, 2010. Net income for the thirteen weeks ended July 31, 2010, included a charge of $0.02 per diluted share associated with store closures.
Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said:
"We are pleased that our results for the quarter continued to reflect strong momentum, both in the US and Europe, resulting in a 71% increase in operating income for the quarter. Going forward, our focus remains very much on execution against our long-term strategy and roadmap objectives. Costing pressures will be greater in the second half of the year, and macroeconomic uncertainty has increased. However, our strong top-line momentum and overall performance for the past several quarters give us confidence that we are well positioned to navigate through this environment."
Second Quarter Summary
Net sales for the thirteen weeks ended July 30, 2011 increased 23% to $916.8 million from $745.8 million for the thirteen weeks ended July 31, 2010. U.S. sales, including direct-to-consumer sales, increased 12% to $684.9 million. International sales, including direct-to-consumer sales, increased 74% to $231.9 million. Total Company direct-to-consumer sales, including shipping and handling, increased 28% to $102.1 million.
Total comparable store sales for the quarter increased 9%. By brand, comparable store sales increased 5% for Abercrombie & Fitch, 7% for abercrombie kids, and 12% for Hollister Co. Total sales by brand were $383.4 million for Abercrombie & Fitch, $83.3 million for abercrombie kids and $434.2 million for Hollister Co.
The gross profit rate for the second quarter was 63.6%, 150 basis points lower than last year's second quarter gross profit rate. The decrease in the gross profit rate was driven primarily by an increase in average unit cost partially offset by a higher AUR and an international mix benefit.
Stores and distribution expense, as a percentage of net sales, decreased to 46.4% from 48.9% for the second quarter last year. The decrease in the stores and distribution expense rate was primarily driven by lower store occupancy costs as a percentage of net sales.
Marketing, general and administrative expense for the first quarter was $110.0 million, a 16% increase compared to $95.2 million during the same period last year. The increase in marketing, general and administrative expense was due to increases in compensation, including incentive and equity compensation, marketing, and other expenses, net of favorable prior year legal settlements.
The effective tax rate for the thirteen weeksended July 30, 2011 was 30.7%. The current rate reflects a lower than anticipated full year rate as a result of an increased share of the company's pre-tax income coming from international operations with a lower effective tax rate.