Abercrombie & Fitch reports 6% fall in sales for previous fiscal
13 Feb '09
5 min read
Marketing, general and administrative expense for the quarter was $101.0 million compared to $103.1 million during the same period last year. The reduction in expense includes savings in incentive compensation and benefits, travel and outside services. For Fiscal 2008, marketing, general and administrative expense was $419.7 million compared to $395.8 million last year.
Interest income for the quarter decreased to $1.4 million compared to $6.4 million during the same period last year. The decrease was attributable to a lower average rate of return on investments compared to last year. For Fiscal 2008, interest income decreased to $11.4 million compared to $18.8 million last year.
The effective tax rate for the fourth quarter was 45.7% compared to 36.9% for the Fiscal 2007 comparable period. The fourth quarter tax rate reflects a charge of $9.9 million to tax expense as a result of the Chairman and Chief Executive Officer's new employment agreement, which pursuant to section 162(m) results in the exclusion of previously recognized tax benefits.
Under the previous employment agreement, the Company recorded deferred tax assets based on the anticipated delivery of benefits to the CEO in the calendar year following the year of his retirement. As a result of the new employment agreement, the CEO receives the benefits during his employment; therefore the expected tax benefits will no longer be available. For Fiscal 2008, the effective tax rate was 39.6% compared to 37.4% for Fiscal 2007.
2009 Outlook The Company anticipates a difficult selling environment to persist throughout 2009 and believes there may be significant volatility in sales levels. Due to the current economic conditions, and in particular, their impact on sales trends, the Company is not providing EPS guidance for Fiscal 2009.
Based on current lease commitments, the Company expects total capital expenditures to be in the range of $165 to $175 million, including $120 to $125 million related to new stores, store refreshes and remodels, and $45 to $50 million related to information technology, distribution center and other home office projects. The Company is also in active discussions with regard to additional store openings in Europe.
The flagship openings to which the Company is committed in 2009 include Hollister Co. in Soho, Abercrombie & Fitch and abercrombie in Milan and Abercrombie & Fitch in Tokyo. The Company now expects the Abercrombie & Fitch flagship in Copenhagen and the abercrombie flagship in New York to open in 2010.
The Company also confirmed it is in an on-going process of reviewing operating expenses, and has already implemented a number of cost reduction actions.
Other Developments The Board of Directors declared a quarterly cash dividend of $0.175 per share on the Class A Common Stock of Abercrombie & Fitch Co. payable on March 17, 2009 to shareholders of record at the close of business on February 27, 2009.
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