Abercrombie & Fitch (ANF) 7 Mar 182017 Q4 Earnings call transcript

Good day, and welcome to the Abercrombie & Fitch Fourth Quarter Fiscal Year 2017 Earnings Call. Today's conference is being recorded. [Operator Instructions] At this time, I'd like to turn the conference over to Brian Logan. Mr. Logan, please go ahead.

you. Thank welcome fourth and earnings our to morning, quarter XXXX call. Good and fourth morning, statement, full opening an we this quarter financial balance summary history. updated released store income Earlier earnings, our and and and year sheet, closing sales these free available on which feel Please materials, website. are reference to our which comments available call. during Also presentation, our referring be as website will in this to investor an we in our may investor call earnings is Today's section. accessed the abercrombie.com under and replay being at be the recorded

Chief Executive and Horowitz, Joanne Joining Crevoiserat, Financial Officer; me Fran today Operating Officer; Scott Officer. Chief are Chief Lipesky,

Before we subject forward-looking make in begin, to I'll we are filings. any SEC remind filed you today statement our statements that our Harbor Safe may

will certain referring to we measures adjusted addition, during be financial In non-GAAP the call.

GAAP in are of morning. financial Additional over earlier the this the to the that, issued Fran. details included I'll turn to With call reconciliation measures release non-GAAP on

conversion and management, delivered and line investments star. bottom and Coupled DTC, everything seen traffic that meaningful am have we brands. today. the in at comparable strategic with Thanks, report plans the the another Brian. is joining Putting a our top of we brands, loyalty. the for Good translate our of reflected customers positive quarter remains across our expectations a our on us while both of overall across you strategic morning, and to embedded center approach and product, sales omni-channel we and to delighted and exceeding continued well That processes thank continuing execution progress all I everyone, do north in and business. culminated disciplined quarter positive geographies throughout maintaining The fourth our channels for is people, into trends. our expense in fast in the to year marketing, our our

the years achieved. Looking a XXXX, of back many in significant progress, has milestones it with making, year over several been important

we a and returned first at our foundation insights Abercrombie in growth. the brands; long-term in the launched launched across the sales the the a we've rolled strong And Hollister groups record across to out program. fourth $X A&F in at and in the building investing billion out customer saw improved X with the We from quarter; customers year. all than XX our programs sales; of passed million with Overall, Europe scores Tmall and more. year's highlights across We feedback brand loyalty included, members million year's we positive of on received Some than a mark the XXXX comparable sales from response. customer loyalty more more start do end. and We what out A&F years. satisfaction We set brands XX engagement busy rolled prototype A&F the and We worldwide to of new drivers Club stores health of [indiscernible] focus in be achieved brands. productive year new and the year will surveys. future digital

drove all Hollister and strong sales with We in quarter. growth the geographies. across to Turning channels another performance

its At noticed started positive the of of to continues momentum market U.S. revitalization drove achieving take journey and comp Abercrombie, and core Hollister to We that improvement business share. signs return quarter stabilization sales. earlier building have improvements, previously said early the further we a and and on we build last

are made strong The in sales increase with of this conversion. grow our engagement during XX% in last XX% year. improvement compared of World total With continues [ph] as area paying mobile more XX% quarter. investments coming of As I DTC saw an than in and grew said XX% with previously, our traffic largest we a another from to off DTC we XX% the total to comp to sales, DTC quarter. storefront, sales we see DTC

productivity our with made build physical capability. new further ongoing driving to strides with stores. In advancements, improved and omni-channel these our our strength continue stores, we've of international concert We from rollout with our prototype in re-modeled

fact, the are us. focus performing fleet. on best and across effective the and of with the best sure most the during the our integration efforts That's XXXX In whenever, stores in wherever can adapting make our shop new is physical customers' and sure of however brands the among testing, world. we choose several digital opened is foundation to we to continual our have learning The of it engagement brand be of making with the they our

growth. Turning to strong brand, to largest some specific continue show on our Hollister, brand. the details

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best guys market annual brand's in take Our history. sales continue the its business share with to

at our the as over We stores to XX which much year's see response Gilly attribute and as and success end our well to continue success from program, we Loyalty time the more XX totaled our helping Club next our testing to than of in scale side, million continue months after full both insights closeness growth grow. customer, enthusiastic from members just of its the On potential. can ongoing with to our of Hicks [ph] to

said spend we club shop per us non-members. than with more and frequently our before, As transaction members more

[indiscernible] most and providing our is for testing some for engaging platform program and of powerful customers. learning valuable loyalty Our

items to integrated is Hollister about We to focus collection previously experiences. engaging this in members-only offers, access them space. special talked We've to industry to leader with looks an as attention customers. approach are able to emerging on unique members-only special early or and

music, during way, in and few and across daily gaming examples. program ensure video, authentic marketing Our A lives embedded are are discovery activities customer's we in process. there the we an influencer our

engagement normal the for mobile holiday of average plays with mobile has app time well single-digit Our for gaming seconds, XX app. of ahead million X.X playtime

success one TV, Friday from generated the Thanksgiving. million we is Black [indiscernible] SnapChat intent, have headliner to performance programs generated according And purchase branded metrics, our launched. our This content recommendation Our key well was of all Summer brand digit as including and above filters survey averages YouTube lift a XXXX. of across [indiscernible] is aspects double affinity, all of on launched The before mobile other by three XX second our Carpe Z Summer, the This hosted on which a on was learning's successful views build X Spotify million the wrapped weeks. X on This with Nielsen. in well SnapChat series. its leading best filter influencer, over by Light, by first Last as as corporate first recognized Wednesday to launched series and YouTube and views we close up Gen February month,

the the quarter. with performance Turning to I Abercrombie. am for pleased

As strong. by comp the core graphic - channels saw base improvement our Overall, and our A&F demographics, driven positive comp business five quarter, tees, made our we geographies, in in year-over-year. grew our In the X% brand. the within progress in newcomers standout. a develop continue of positive five genders, and quarter outerwear street the first first men's, to drove from target was the with in a were years across throughout rediscovering fourth comp last and sequential women's, in strength both we comp knit brand resulting improvement We customers categories. In to and year years. We

well in by and know loyalty performed particular genders. bottoms business category pants, that driven men's, quarter jeans to to across is good growth. a also Women's building another strength Our we was of

Our our changes to been performance. have summer architecture a driver big

top investments and count, SKU items inventory on in comp. sales in inventory top focus stores and improve conversion Our will

engagement, ending year We around strong Monday. Friday A&F Club Our and and with this successfully the fourth club loyalty generating year, Black Cyber X quarter, has program million in interest than more involvement a the harnessed particularly members.

as influencers experience In-stores, the review, connect customers' data new social time this with in building this, media is driving use performance as of As our generated rooted engagement with more Similar part and the user us base and points. to encouraged categories we covers seeing non-members. to remains [indiscernible] This and seeing in shopped of also data approach brand to what the specific in critical we engagement we we'll A&F and creation and revitalization know stay measuring are leveraged in learn across adventure our and we grounded with Score of our Club Promoter how We such what online customer step doing. to our improved Listening Kelley, data, to store initial saw incorporating successfully A&F XXXX, investing everything to us on variety us a through In an touch has customers. we is of often to our the we do channels. and and are analytics on authentic and our wide what to more providing as Net brand our driven insights in and our our program with and we activity. a local in then needs close start listening be helping more collection. everybody the is design, kid's to its drive takes way and at Hollister, by an on prototype, them. with based brands collection, club we're formulating authentic activity of our we're customer loyalty DNA, From influencer in heritage customer than to introduce The applying our Abercrombie. in spend content to valuable Club key time,

of and driving to profitability, In our pillar reflects threefold. which the customers, the fundamentals, inspire focus strategic relentlessly discipline Inspire financial continued business brand's to each focus are, our our the execution you'll our along recall growth of leaders. sales year, results playbook, and was strong of our for to develop on and XXXX, team's Our innovate our pillars,

attention highly product right consistently delivering an differentiated on assortment. obsessive brand integrity, high quality, Firstly,

where play, just our customer Secondly, traditionally third, and including analytics building our reach the harnessing infrastructure growing have our from loyalty meeting evolve. [indiscernible] operated. insights they integrated and marketing needs customers customers' we live anticipating our and and where expertise, And with as to and program engage not they

on the engagement focus improving customers of which platform to digital our and right great progress. people our decision processes informed growth. to investments In Innovation be been made for to from check be and in long-term the critical piece allow equipped reach or pivotal making growth. that new at said, building be future Tmall, our we'll expert to is where types our moving core local speak role, that, XXXX future and in out swift getting to Leaders particular, and of to responsibilities and fast innovations has We finally, the success base Turning also of it interplay within course more and elements. China Joanne We've drivers empowered success we've talent. important pillar. team how [indiscernible] element our the key investing ensure of and people. and fulfillment. solid such best of growth. further reach its has digital physical These engagement that marketing shifted on to the few organizational different implemented mix and partners environment. hired remains it built on engagement years market. over pillar. and Throughout we've to I'll us further and highly important The long-term is believe our today's A partnership focused this brand making why the continue given competitive The through strategies shopping, use from the brand different to an both support may between we've tightened refine new to Because markets, experience building And to to With the we growth hand our explore structures, in past and past our base on XXXX, us market. roles with retail required areas details and move a we year to right the so as and With any each been our learn the in our that with element through and and to talent Develop XXXX, internal see of key safe for that attracting focus in top of

Thanks, good everyone. Fran, morning, and

Overall, and landscape. our and this to continue of keep all we at actions important outset, focused of past XXXX the the years, foundations retail capabilities center we at and base us were an year platform. at evolving do forefront our to our building the the on do few have that over and of on investments that and for the rapidly at that focused said customer enhancing future was delivering our hardening growth Fran us the put allow we As

to of stores few going with enhancing will investment In highlights the from to closer key the things still innovation productivity. and a to continue the that us loyalty our We difference and XXXX, to date. us in physical we focus ongoing see significant was and marketing, weighted I'll ahead investment our the investment will the the scale with be an prototype a foundations testing them. we new build invest transformation laid towards store investments as customers remodels in equally match areas In loyalty, well opportunity be through in proportion DTC, progress covering XXXX. be get to of in as XXXX the XXXX environment year weighted stores. important our omni-channel ongoing in most make to the omni-channel towards as marketing, made those DTC, and that on and stores environment XXXX, heavily and the and company's

first. investment leadership our brand, driving at with This journey to helped focused through platforms as demographics to role The that an influencer gains and fully brand integral base reshape will innovator expectations its to on is from immersive for our and our strong to and integrated marketing XXXX A&F its starting looking content first influencer build its platform brand. the customer and Is us mobile important relevant brands in progress. on them. Hollister, perceptions that engagement campaign reach reset are This in Looking saw At across an leveraging started digitally see and we XXXX A&F has position and sentiment The Hollister engagement scale target media launch to Time, of programs. continuing this the innovative playing of continuing with build native programs. on marketing driven

reports. will data to and customer engagement. are The with Our continuing personalization, innovation industry drive channel, our digital early high increased them. XXXX investments be to across see we've of mobile applying in several DTC off, continue strength. experience DTC customers' build product leading analyst of reinforced insights level our was this customers for rich to and continue recognition by our validated our core just and and in a made on in paying us analytics for in capabilities experiences offered including engagement to by our both tailored mobile overall This terms brands invest

and means of engagement environment. rollout innovation members. further both in more in programs loyalty brands. loyalty scale platform ending Loyalty drive will drive access to we growth have Our across grown are and and growing stores our continue our driving do customers, in versatile engagement XXXX, of as physical programs. powerful digital year investments membership graphic in to XXXX customer strength in They the with million inspire than a XX The

understanding behavior The applying Our to deepen and programs-rich be interactions of basis. from inspire also data. and them our investment of how their personal a will and further capabilities will to on directed our customer our insights engage enhancing our best to wealth analytics

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evolve. XXXX in ensuring Our need their omni-channel continues and attuned investments our technology use in on road, to to customers we of continue this as will behavior are

industry an experience. is leader Our goal become in to omni-channel

the is product generally, increasingly experience a the purchase is digital starting endpoint. case is discovery for and not the connected. Digital often always As omni-channel, and but physical this point with

for still perspectives. stores serve familiarization an important a fulfillment trial physical customer journey, and brand experience, from Our role the

previously in important driving productivity investments experience, store fleet. The whole. make both continue with in the to traffic XXXX a helped fleet in investments We point across physical that an improved and covered quarter year brands, both drive our inflection stores to as progress across store digital and productivity marketing and improved our for productivity reached customer fourth the well and as our in as our is to the

interior In store and XX closed terms. completed store coming quarter we stores remodel included stores, of brand. XX on XX across our reflects productivity XXXX, the downsizings year. prototype for fourth During the Full existing favorable we XX which of Hollister the of new renewal lease stores, into we seven and trends investor also included than This and A&F improving closings fewer presentation. openings store XX details and XXXX, expected XX and the are the Pages

We XX% have two XXX leases more XXXX, with U.S. than expiring closed next about the years. over our since stores of

have stores. We to the flexibility by leases channel significant continue strike re-modeling our stores, balance to resizing drive or right and closing or renegotiating efficiency

greater Our productivity smaller store experience experience footprint. shown an store on we drive enhanced a through has can

productivity. here The worth been the and customer mix. Longer to in approach today to individual and integrating capabilities a focus through of footprint, smart driving all capabilities the customers' our and the has to omni-channel improving continually improved productivity in improved has needs omni-channel use holistic smaller experience of We and evolve. term as investments part resulted market and on made line dynamics will in real which stores take no continue there is investment are inventory remembering associates it's the finish

retail. our In stores new to with I be role We evolve prototype rollout of further in of this investments efforts we'll as earlier, future XXXX, accelerating continue in omni, for area the and mentioned the stores.

open XXXX, Hollister, XX including stores plan XX four geographies, A&F across For and to full-priced we kid's stores. four

In downsize which and seven we format remodel stores stores, plan downsized. to prototype Hollister six approximately of to kids and will new stores addition, A&F the three XX be

We in also close negotiation business in to primarily lease expect stores pending and XX up the outcomes. U.S. XXXX, to

in important on we delivered XXXX on earlier, continued transformation laid ourselves invest the to for set through a in build the and for look XXXX, with is our the pleased foundations ongoing particularly company's Overall, mentioned position as we and business date. performance we're progress having to As in the XXXX. goals year

ever, strategic business, towards our long-term As we manage the capital tightly our growth directing strategic that priorities underpin plan.

I'll the over call turn Now to Scott.

Joanne, Thanks, morning, and good everyone.

Fran pleased with more income As operating with are results year. than mentioned we last fourth doubling from our earlier, quarter

made up the XX% and fourth the presentation positive X comp quarter the illustrate comp year the signs Abercrombie. fourth X% We were benefiting momentum with foreign tightly approximately the U.S. and expense continue last from with initiatives year sales sales X% geography, benefiting geography cover stabilization XX% $XX in comp XXXX. with X% for performance. the or and positive strong returned trends Abercrombie additional by of with to line. Comp for brands, for manage of leverage, progress the the from X improvement for quarter. currency in positive across improving showed X% supporting Net sales in results, delivered the by week million international up By to full still quarter. sales also By brands and fourth of further provide sequential with Hollister up strong throughout and up traffic with sales across Starting our $XX traffic overall were investor quarter and the sales business, I'll improvement continues sales and quarter in markets. growth up $X.X XXXX We and up last billion, conversion outlook last approximately drove Hollister's quarter. and in in geographies. and while channels. and geographies year quarter sales X%. were quarter another top were million the brands from drove delivering that XX% or Pages our across comp then

growth in omni-channel both driven our markets, Our direct-to-consumer perform in by fulfillment. and U.S. to continues with the business strongly mobile, international and investments double-digit

our in to For during and was and last coming to we adjusted results XX% the reacted quarter last trends compared quarter capabilities. the the an highly grew of basis. approximately quarter, last lean to year into XX.X%, non-GAAP on now lower our Gross Averaging fourth also sales DTC pressured rate of year. total the higher to year, than expectations I'll XX was the recap line with quarter. points cost XX% chased promotional of basis margin as compared into for competitive our sales rest total sales the

from could result million was were with adjusted on presentation. results excluded primarily the - with year $X fourth Page Excluding tax in foreign interpretation during of investor legal from estimated act sales. to charges operating The associated and income, changes and charges the of our which related were to further adjusted slightly the detailed expense. Jobs asset the net other estimates Tax impairment our XXXX. operating on the related including clarification results charges Operating $XX analysis, Cuts $X earnings. full store our XXXX, the discrete repatriation of which adjusted subject million year on Also fourth and are last these provisional of X tax to to Acts and quarter higher million, fourth expense, quarter of down accumulated onetime Beginning to to quarter act, the and liens impact of

meaningful in profit million we our expense our continuous allowing quarter, improvement delivered year, from the During reduction, us reductions last projects year $XXX non-customer-facing primarily to driven exceed full expense areas. gross targeted of by

approximately in The foreign last while in last supporting Gross from that $X.XX to Adjusted sales from additional $XX investments loyalty. lower X% sales of year resulting On year approximately marketing, promotional initiatives. currency the week approximately XX%. quarter, As down by from share XXXX $X.XX was efforts, diluted diluted $XXX currency, Recapping from basis, week on benefits each to sales operating of retail $X.XX And average $X.XX. for million margin share approximately net compared year, year. to with loss to unit last X% of foreign of last X%. benefits billion, strategic included $X investments the currency basis and an last $X.XX year. X% Adjusted and per and year the higher in per growth still was of XX.X%, quarter by driven was income an week leverage $XX We in the approximately of supporting throughout and up DTC, with was during XXX year million while with income and comp and included environment $X.XX still expense was additional $X adjusted rate last approximately year, compared last additional by or leverage, up strategic benefiting omni-channel in compared share. sales, million results. operating foreign Adjusted were and down income remains expense last income year of million. adjusted XXX $X.X million benefiting XXXX basis XXXX a drove currency was points a points result pleased XXX income was operating our highly operating effective our $XXX net the and diluted primarily from $X.XX basis points full million expense foreign we overall the $XX in were million Net our performance the year. compared and tax over of per rate our

our of key million was fourth driver to quarter full of Our a compared dividends funded cash $XXX our reduction. $XXX million year CapEx approximately which performance investments, last year, strong the flow and debt operating

year. ended compared the with We the sheet. in $XXX cash to million million last $XXX Turning year to balance

of of the to expectations debt, year million the bringing the selling last in loan During borrowings a positioned and were of million leverage end quarter the year the start Total first line maintaining quarter outstanding X% and react to into year, gross compared the the below us well inventory quarter, to end quarter. million We of at we ratio to was with $XXX in-quarter at coming the to repaid the $XXX up one. at continued fourth compared of position last term quarter. our $XX to for

Looking end inventory forward, we quarter the to expect low with digits. first mid-single of to

for Turning to outlook XXXX. the

at We low-single to expect comp be sales digits.

loss also expect low offset single currency week. the impact million, of XXXX $XX foreign by net and with to largely benefits of digits, to We approximately net sales We the from at hedging. be benefit anticipate by currency operating approximately by additional adverse from million sales $XX foreign income

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be of currency impacts year-over-year benefit further expense More of operating $X loss billion, while adverse In addition, increase driving the in expense be leverage. we higher sales, expect to volume-related XXXX operating adjusted XXXX half and week. than expense, partially by excluding other foreign is operating income, from still expected the to up by offset increases from from the from additional expenses approximately driven X% of

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incur with to we to write-off approximately of the related discrete However, $XX associated XXXX, charges of compensation. share-based expect tax assets certain million deferred income for non-cash tax

These to first an tax in double-digits result, we reduce XXs. upper full teens mid low rate the our in loss. the be a charges anticipated to to the will primarily the is quarter effective be recognized As low to effective expect pretax tax rate on first year which to quarter, expected

the expect we effective tax year, to in to mid upper the the of be balance the For XXs. rate

effective share-based our It additional Beyond not currently that rate. fundamentally allocation XXXX, do reform the capital philosophy. whilst it compensation not does worth anticipate change flexibility, is significantly impacting may provide noting we tax tax

Our approach to capital allocation remains consistent.

focus will long-term growth. sustainable key investing of drivers We on the in

we evaluated through $XX $XXX expect as including call driving million For the These and approximately prototypes that that, through to capabilities, to loyalty remaining shareholders quarterly, our of repurchases. digital channel. are we driving in Directors out investments XXXX, turn priorities over priority and store factors. million continue increase that our expansion our to capital that omni-channel with is in XXXX our Fran. million plan growth. investments I'll CRM considering programs track update rollout and programs. share our return business, investments liquidity With improved will both store of board dividend. of the expenditures the store to and month, quarterly $XX and new back the business announced These store ongoing of the approximately Last approximately $X.XX compared to After are and allocation valuation Board approved our investing We roll capital are fleet continued the in include dividends $XXX for customer the new future million new to and scale and engagement of to critical for we productivity

future year pleased base progress, building was and solid the I Thank a another as you, year growth. results quarter fourth whole. important am for a XXXX Scott. of with our

moment we there's challenging is focus brands many I much experienced a to of I've years during and know ahead worthy retail. and a their commitment That of for years our take of associates moment our something my thank the to most still one celebration. of However, fulfilling in to wanted us. in work

excited made that we As that, of has hand strategic plan, industry the before simply have be retail growth. deliver methodical been XXXX speak rigorous, it execution us to [ph] from accomplish the stable to to and value and to our of continued best and plan [indiscernible] the best our to foundations the our with And energized sets commitment a we unwavering to our building omni-channel These with I've progress have The Brian. of in back can that XXXX. long-term investing in team I'll year allow progress said further in me we the results route and a talent and represents the experience which stakeholders. delivering will belief

your Thanks, take Fran. [Operator happy Instructions] Thank That be you. concludes comments. our now to We'll prepared questions.

you. ahead. our with [Operator And Please question Lejuez comes Thank first go Citi. Paul from Instructions]

in Hey. Thanks, of stores I'm terms turnaround guys. if seeing I'm the of the stores, then just The the brand? A&F quick curious similar improvement in rest versus one. just efforts the what to brand on differences the Hollister. And curious you're the saw versus performance the A&F similarities those of you Thanks. a flagship a and

Fran. it's Paul, morning, Good

come in the quarter the several, together We is the year for to the made first in comps time opportunity our are year. excited strong working. our this A&F to very get the voice about the we progress throughout are and in showed a positive is in several very, very we What experience closer we customer, seeing brands and years. that culminating product, have progress actually fourth Hollister had the that both year,

of And happen journey and team, understanding to looking rigorous focus spending with well. in truly, time it's As and And that in just we what indicators we growth saw our far Hollister [ph] on Abercrombie nice that positive fourth time the were across traffic a all - Those to as a saw early for. saw at quarter, across amount the we as genders we really well. thanks category they're the started of we as stores loss real channels what tremendous the both execution saw at and specifically, playbook conversion spending to broad-based opportunities, customer growth. saw of they're as goes the opportunity improvement and In as that.

A&F? store traffic positive Were at

we America A&F the I as did brand. improvement in our flagship pick was, see particularly comment, business, North up and the trends our stores flagship International in

So the but negative. traffic remained trends improved,

do on see continue those experience those in allow number that of those have. tailored the We've improve assortments a of to conversion We us We've to we locations. with efforts the in locations. more including performance making invested the to We've the international positive and embarked traffic in rolled loyalty with customer those better loyal digital and programs in XXXX rolled to and business integrate our have to omni-channel the markets. out and our conversion focus is focus out driving local more our drive to stores. also those markets the We in on physical a stores, in

Thank luck. Good Great. you.

Thank you.

you. Thank

Deutsche Tiffany Kanaga with from comes question next Bank. Our

as sales can? positive please our the expect the Hi. comps you're you. the the same Thanks you the quarter your year planning throughout you Can into Thank quarter, for taking pace? if currently the first performance comp at of we it? in questions. good Would seeing you're discuss month cadence extend by And whether fourth quarter

don't very but we We show both in comps comment comps, excited current than that's Thanks, progress expect outlook. our to on quarter performance. current we growth. be across look again to cadence And Tiffany. consistent quarter were the other with able on Yes, on very in brands. comment the excited to of a top business we performance we both typically going in reflected in brands, positive to saw to that as fourth we of again, don't anything say the And very are growth QX, positive overall, on the is

that So in year lot continue the and We XXXX. and a changes and of execution we traction of our expect of rigorous great we're lot with playbook customers, really we in to our process XXXX. the changes a implemented through seeing had

highly year evaporation If to I of as seeing could drivers that the part argue environment the the one into your ask behind margin what could in remains one a you're for AUC like I'd just gross competitive it dig and are expectations especially and benefits especially the back in of expansion, mall? more.

the into that got were it's little somewhat our for and we commented the We've top AUR as we few that outperformed gross pressure data as we performance saw on, able quarter, did so margin Tiffany, We definitely that bit quarter. to we our capabilities, pressure expectations through in were moderating meet worth of chased see into the little but in see a our the and We a the did able growth, points declines see quarter. fourth of AUC couple chase - expected We step we we fourth a AUC. Yes. than quarter, growth differently there bit from did coming as that's top there. probably we support during away line did promotions move with true. more line expectations, products to to

to into we we the move moderate declines As expect to continue XXXX, through the do AUR as year. we move

we and FX our the well. a we activity. traction, environment get But experience more in aligned, away our and and reflected voice we're that's in we from as favorable AUR XXXX expecting and product some promotional step outlook expect to also As see expectations

Thank you so much.

from Tunick We'll next hear Brian with RBC.

of add in Great, been end guess years. Fran, there's that congrats we seen enthusiasm my of the category the for Curious, strong on a thanks. I'll talk I several a about lot the year. haven't

make where Thank you've from beyond, do your the there, you other guess any beyond trend great stores, that is certainly million happening you curious, these looking expense buckets are you enthusiasm. but question XXXX there downsize what other the just much. a pockets a So curious think of think investments quarter some that competitors very Just share? as on have maybe you're there you then $XXX is of initiatives? you market there any Do fourth I side. up out bottoms in out think expense and sit, on closed And are to the coming picked you out there?

Hi, Brian, we in for see actually, a our in business. brands, and very the progress XXXX did both about are made yes, the excited significant bottoms that trend we we

been mentioned, also I we're to had exciting. adults. really men's happening record things a in we of trend both a trend to continue also for lots very, we out very It's see that And very which grow. very business a In denim in had actually there. strong did women's we actually for does and in continue loyalty while. genders, is see happening There saw a in - that, was the which excited nice pants seeing Other Hollister, than business, Abercrombie denim to a category that business we've business. year Abercrombie our we for That's business our other As business.

and graphics was that was business also very fleece across brands, Our both both in driven very, T-shirts both genders. strong

putting we're them. about a that very, excited items out of fashion And lot both response we're customer So the again, the getting for to our the team's and brands. our and playbook executing working there it's spending seeing close to I as customer very in time said,

gross We were pleased on XXXX in our reduction our $XXX expense target, reduction target million. to speak I'll side. of exceed our

year an this as we excited we're we As come to investment XXXX, to and are at looking this invest year.

In X%. is in that of most significant working. the they're around as investment outlook, our is OpEx, we business. Included the mentioned up parts Our in back playbook,

the omni-channel, to loyalty, be cost with funding other we really those it's of not DTC, but marketing, investments we it's store occupancy, out continue the found So across drive that But across model. the will model. entire portion expense analytics. a significant reductions just business, We'll that,

Good Thanks. Super. luck.

Thank you.

Our next the with JJK question comes from Kloppenburg Research. Janet

margin And have And think think well. wondering as I But Joanne, variation gross may we just Thank secondly, versus morning, I you about promotion see trends on to the to this in drive give now why full-priced the first question, the you your was can I that answer just Good if not current curious opportunity could going some [PH] move was on progress. you'll use comp you're not comment EVO the trend And continue traffic as that second half. curious your wage to congratulations year? was comp in throughout the selling half just improve year. you the on comparisons it. brand? to know the then Or Fran, trend, reflecting to Do to I everyone. the back pressure. the do you. you on

They question because the parts that take are related. related. I'll of first two definitely they Janet. Thanks, are

operating are We we of income. a and delivered made, deliver we've top in this comp progress the we're on that We with growth. X% improvement growth pleased expecting and did nice year,

aligned. to line. line making to we into responding growth also continue the to the very and globally. move the And using in then be we're able and to XXXX, promotions terms to the the fall into away a key line, voice, in we activities to back top have from focused that of XXXX. business be activity step that we're of our and getting on to priced customer to driving from starting we lever. And having are only and is of away a levers online place, And traffic, moving But And marketing, in expect to that regular promotional that we the bottom be And we from assortments to the brands both but on the business expect number been there the drive sure to traffic. into and we rollout our able our on We've we're promotional our As drive the see has across on experience brands it's engagement of response including our proven away that. that and to deliver globally customers we'll programs. our see things And see balanced seen result, both we the programs. step combination past continue have platform programs terrific loyalty change now, as loyalty product loyalty to improvement leverage continue and growth the those from to in-stores we as gross really in been all able the deliver margin we have

Yes.

for pressure, in our have wages we distribution and in expense wage On across centers. our the seen fleet side pressure

to improvements offset throughout. baked we continue will this multiyear these So in wage trend, have has into our efficiencies XXXX outlook. model pressure and kind we pressures productivity This the of with a so

Thanks so much.

Mark Our next with question Baird. comes Altschwager from

morning. Good Great.

but I prototype move capabilities. Let you're the as weeks seeing in as are omni-channel for relates what to just the congratulations and content apologize this, rollout I as well. my you fiscal terms in what's A&F it making if offer especially 'XX? then planning missed And to me forward, are sale, what stores these you of

Yes.

new during roll one prototype out a the formats stores store eight from about under four have new new perspective and I'm we'll rollout, new - the sorry, the remodel year. On prototype

had experience voice very, market very the about really to our opportunity on that. an focus exciting. we've What very, customer customer things hearing is from We've and very - learned we're positive in of the the stores

on these on Pedder example, third of in talked Street and doing almost last prototype focused space Kong the super store new and really closing business. the are about a in productivity we of City Hong in stores. We exciting about same seen our year amount Harbor increasing A our we've opening a

continue as these move to XXXX. opportunities we we into look at So

our our omni-channel I'll piece. are Yes. capabilities just to capabilities, those in prototype one add embedded omni-channel Related more stores.

in to experience. digital our And interface the technology put continue our in improve effectively to We of on and and them stores. to the to XXXX, with then customers we'll also hands physical our in that melding more investing our execution be associates allow

Thanks. And just a quick follow-up.

where any you Are you're you able business demand marketing Just trend seeing Thanks. strategies closing have so? update on to markets in the you're stores? any digital the that or to recapture in do much of

Thank you. Yes.

at we stores, happen. when much is We have closed have the closed loyalty more or opened move it's disposal have, we of rollout market transfer stores of when the particularly and growth see be physical leverage the one opportunities reach very will continuing data digital in customers the a that forward. to to we where see store closed customers data much some the opposite but we transfer when there's stores we to nearby where our has program focus We where or more business. we actually Certainly, see a low transfer. more the digital We and out part our on more customers, markets stores ability more we now our have to engage data, in of our we been to that as

you. Thank Great.

Steven Albert next Bank from with of America. question comes Our

an impact to And your morning. XXXX? confidence in pressure fourth some is in quarter. more wondering the margin XQ? gross inflection in in to a outlook benefit then gross through XQ for gives from that's margin XQ in what continued tailwind both color the if margins currency What on could foreign I contemplated as the Good on gross was FX you give you

Yes. I'll start with the FX.

margin. in about FX million, sales impacted QX in by million about ended So $XX $XX

to we'll So that to tailwind. as see forward we continue look XXXX,

$XX line As million rates, to line. we top with dropping it's op and today consensus the about here income about million the at down on $XX sit

Yes.

moderating expect we declines as it through we the relates to year. inflection QX, to in As continue move AUR the to see

move we we benefit occur from activity. that expecting, some I FX we mentioned, to also first than as mentioned, the quarter AUR hedging headwinds move did environment promotional as able the in to half FX year. deeper back the half as to of were those against in see year. year we the As away up the the the benefit fourth We're through of We're

So AUR to our cadence factor of that's expectations. related into the

that, you're going how how in strategic business some you - view parse shift then out kind of or you cost Do if much past found the and invest maybe as much into and five over you going cycle, this then And savings front investment to whether invest could the quick you're your incremental given much the of of a out you to view multi-year how follow-up. you year cycle of initiatives much years? a how

Yes.

the of XXXX, As half outlook total loss from about is for with the XXXX. by the we think up that extra OpEx offset around foreign week X%, coming the exchange in being of

will savings be other going of that that not around year savings. point. be would and I'll net that our We're making of the incremental reduction this of making we're the investments target this funded The half But the at by we're say a outside ongoing large to a cost number significant majority that investments give initiatives.

savings. in drive is continue identify we'll expense leverage model and And to Steven, our to our continue operating focus, leverage to

cost embedded process. as well We have improvement a very mentioned, rigorous we and,

more processes, and the expect particularly dynamics. moving continue they to efficiencies We in at efficiency to with more all model looking those we processes evolve of our forward. as review find omni-channel for We're

Please Simeon Instinet. comes next Nomura ahead. question with Our go Siegel from

for [indiscernible] is any This I marketing. expectation then inventory. Dan dollars going you by Thanks composition are Could this And and was parse Thanks. about talk you you my How planning taking for wondering if brand question. a on Simeon. year? quickly could forward?

with start question. that I'll

saw our about a was come we strategic you results was asset inventory by items. obviously, not to into it in So fact, that the fourth invested accomplished as quite goal, today. in the we that customers talk our an quarter to plan key we the The were and using quarter disappoint goal that and,

into that are spring had Our and we where out by are but don't current. they're brand, normally are they parse the inventories and very very we confident We clean are inventories current. with

to marketing our our we with in in traction impressions, as to seen and both but in over it we to investments efforts, foundations continue building that customers marketing. the do that we up really year been in parse the our don't plan increase to have expect of in experiences the this digital marketing space, we've number had marketing engaging our innovators and way As relates terrific the an customer two authentic engagement year. last We and and investments, laid the out years we've

guys. Thanks, Awesome.

move with Shapiro we'll Marni next And Retail Tracker. to

Everybody, congrats, social media. three love and quarter you

bit at coming conversions are - level? is this So the up you're like in sounds store? then States? it know in to what the would a you has little continue I penetration to I it's because nice of DTC you just And early, - very the business, a are can getting purchases And guys returned, Tmall. venue want you talk your that about those on you returned are grow just good successful you similar at And as a you quick store level, to which returns about Is to been of have those converting consider United but feeling one it it? percentage

Joanne. it's Marni, Hey,

a we engage large returns look to to it DTC see environment important very return., the relates to them been digital aspect an physical As that our respond the of We very a DTC back proportion at it's see its and going returns, stores. way as We opportunity customers. do environment. of engage it's And customers. our the important we - between both great

out, capability basket, and the important customers into We're our you our positive it also have conversion allows more us been the go as by our the And they by So into go of as turnaround. brand store continue through get engagement grow, seeing. our and our having store. customers we're chance with very the particularly the when is to new are a to engage that encouraged introduce having brand, encouraged their to what associates customers return to we aspects comps pointed and so we're our

and is to build move focus forward. ours on that that continue a we we'll So of as

success. at As that to always us brands. your Abercrombie nice both on we've will XXXX. far had any was and launch we great exciting as head point, for success as Tmall year Tmall very of continue Tmall of expect to channels. some goes, on relationship to for looking It our opportunities we That to into our grow this in We're

consider U.S. we certainly but opportunities, at looking into So would time. this nothing

the really doesn't our penetration, U.S. China in that, mentioned, Just a opportunity all we're terms opportunity the opportunity. penetration to and to Fran as we grow Tmall to mentioned, as And very where brands on those Tmall hits have in we've our excited market same to is and add in reach ideas. low But represent The been, we business of the awareness on new up of to of always open Tmall market in have and expand Fran grow the to build brand an aspects awareness. specifically.

single participate could fee, you remind you in Did me?

for brands. very a both had single fee We did. we Yes, strong

Fantastic. Best spring of luck of guys.

Thank you.

question Evercore Saad comes next with Our ISI. from Omar

it few taking Fran. I impressive ask sure extremely for seeing my rewarding. I'm Thanks off. the Very and work pay it's questions. last to in years Hey. wanted

more there few than been years now. You've a

kind and think is that's us help And the to from do from be company, of a you. some of when how the arrived brand perspective perceive perception consumer I changed where today. could over brands it interesting has evolved the how you first you the put to how hear? perspective Thank time, of would consumers If around

being only we're exciting that. Omar, is customer's year. quite been our brand. opportunities time. engaged for [indiscernible] exciting, over understanding Hollister they're has music, process. see evolved that how not call great in brand, engage the a They're that the marketing. is them really the to gained Sure. journey really for gaming, we making share. the Clearly It we progress has innovative transaction, with perception and has leader what a and actually here exciting discovery Yes, very to the to see customers, customer, loves The customer market really in really the thanks Hollister - it's with have really with willing as new customer, that the for video, but

learn to not time about part So us branded to be of the and is only but their spending with trend brand. a just the

X.X the XX than customers Our the stay [indiscernible] with gain, fourth has industry average. are us quarter million and That's for example, during for views the considerably seconds. longer

starting really negative engage the at see perceptions We're had the in positive We have Abercrombie, to from the customers years. talked excited and gone very several first the in [indiscernible] for that showing it's and expectations. how time also the to customer with fourth us. quarter sentiment study So to about Abercrombie's

seeing. brands. We're seeing really really, in So with we're progress both encouraged we're what

Thanks. Appreciate Good luck. it.

Thank you.

to Anderrson And move next, we'll with Riley FBR. Susan B.

Hi. I I up want the to on follow guess, Good quarter. new Abercrombie on Congrats nice format. morning. a

the any four I total last yet of year year versus terms metrics I think another had their that of you old said out format. four then and for eight. maybe you if rolled performance this also, And a was wondering in you

one in XXXX, Abercrombie One doing this closed largest our Hong visiting the for exciting space. in six mall-based people the amount actually that our for past almost and of is example, our we example we X/X same the higher 'XX I City actually than mentioned XX where mall in up seven one over beginning business about domestically location internationally. stores of we're the store, Kong prototype in that and we're mall rolled earlier, in seeing in million here year and stores. opened in of Harbour Yes, A&F word out it's average productivity the with these productivity is our What

prototypes. our really experience as improved for are that two well customer as sentiment customer and productivity things working So are the

Great. roll then? many And this did going you say out how year to you're

to stores plus have in the of think XXXX we new about a total think remodels, it's on I XX new experiences I plan.

Great. Great.

have actually in great. and We one our looks really mall it

Just too. one A&F follow-up on the customer,

little maybe of you all? that customer at trying demographics, change a demographic to the seen up terms age were In it you spectrum. take bit the to Have

at started of really us at and to has true XX% age historically XX. our that shop About customer customers today. with start of to XX with shop age the the of our us Actually, is

relating target, they're customer the Our we're the space and as as to on to who before, focused goes, XX as and XX. mentioned we interested them But are visit is in demographic customer our in. far that really just that us providing product they

it has is. demographic remained the really So where

Great. Thanks so quarter. Good much. luck next

Thank you.

concludes time back And time or our the to additional Horowitz to closing that for questions over remarks. for Fran be any collected and comes for

Thank you.

are past progress pleased year. our We with this

industry. the networking look an We all of speaking and confident well-equipped prepared have omni-channel Investor to talented best at a to on retail team, we you important ahead have I the building am of in with Day the past year compete April. experience forward at playbook the the end few foundations deliver to and our the made over is team We us years,

does thank participation. your that call. for We today's you And conclude