abercrombie kids comparable store sales up; gaining traction

20 Aug '10

5 min read

Marketing, general and administrative expense for the second quarter was $95.2 million, a 10% increase compared to $86.7 million during the same period last year. The increase in marketing, general and administrative expense was primarily due to increases in compensation and benefits, including incentive and equity compensation, partially offset by a reduction in net legal and outside service expense.

The effective tax rate for continuing operations for the thirteen weeks ended July 31, 2010 was 27.2% as compared to 176.8% for the prior year comparable period. The second quarter 2010 rate was favorably impacted by provision-to-return adjustments for certain jurisdictions and the resolution of open tax matters. The second quarter 2009 rate was adversely impacted by a true up of the estimated annual effective tax rate as calculated in accordance with generally accepted accounting principles.

The Company ended the second quarter of Fiscal 2010 with $613.6 million in cash and cash equivalents, borrowings under the credit agreement of $53.2 million and outstanding letters of credit of $24.4 million compared to $366.5 million in cash and cash equivalents, borrowings under the credit agreement of $36.7 million and outstanding letters of credit of $42.9 million at the comparable point last year.

2010 Outlook
In Fiscal 2010, the Company continues to expect to open Abercrombie & Fitch flagship stores in Copenhagen, Denmark and Fukuoka, Japan and a Hollister Epic store on Fifth Avenue in New York.

The Company now expects to open approximately 20 international mall-based Hollister stores in Fiscal 2010, a reduction from the prior estimate of approximately 25 stores. The Company has confirmed plans to open one Abercrombie & Fitch store in Canada and its first international Gilly Hicks store in the United Kingdom in the fourth quarter of Fiscal 2010.

Domestically, the Company expects to open three Abercrombie & Fitch stores, including its first store in Puerto Rico, three abercrombie kids stores, three Hollister stores, two Gilly Hicks stores and five outlet stores.

The Company now expects total capital expenditures to be approximately $200 million, including approximately $160 million related to new stores, store refreshes and remodels, and approximately $40 million related to information technology, distribution center and other home office projects.

The Company expects to close approximately 60 domestic stores over the course of Fiscal 2010, predominantly at the end of the year. The majority of these closures will be by way of natural lease expirations. In addition, there are a number of stores where buy-outs or other closures prior to lease expiration are expected. Associated with these closures, the Company incurred a non-cash, pre-tax asset impairment charge of $2.2 million, included in stores and distribution expense, for the thirteen weeks ended July 31, 2010.

A summary of store openings and closings for the thirteen and twenty-six week periods ended July 31, 2010 is included with the financial statement schedules following this release.

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 September 14, 2010 to shareholders of record at the close of business on August 27, 2010.

Abercrombie & Fitch Co.

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