Abercrombie & Fitch (ANF) 27 Aug 202020 Q2 Earnings call transcript

Good day, and welcome to the Abercrombie & Fitch Second Quarter Fiscal Year 2020 Earnings Call. Today's conference is being recorded. [Operator Instructions] We will open the call to take your questions at the end of the presentation. [Operator Instructions] Thank you. At this time, I'd like to turn the conference over to Pam Quintiliano. ahead. go Please

morning, Earnings Good to Second our Thank and XXXX Call. Quarter you. welcome

provisions these today are of Earlier Joining XXXX. Executive the risks the from our company's the earnings on and in call. me are during call results available Private is Scott and issued second Exchange factors on contained referring on will Also Securities Chief and the Securities forward-looking at release, to materially we Litigation which measures of differ keep expectations filings the Reform any that Officer; and in Fran actual Lipesky, section. our the Act subject are In is certain to available made is cause Financial subject the call addition, morning, under Commission, Officer. this harbor corporate.abercrombie.com we website the to to Investors These our an of be assumptions website uncertainties uncertainties quarter safe mind detailed we forward-looking A financial on and with could Chief non-GAAP that Horowitz, the today. statements mentioned investor Please statements presentation. discussion

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

ones and safe. healthy your are everyone. morning, loved you hope Good and I

the DC, we've global thanking build store all our discussing hard together, position associates the so and humbled would to faced, able second by period we patience, up, it to fortifying quickly to part Despite our partners our continue continued work, demand our team vendor office get home up have done. team team, Before the changing quarter of be future. unprecedented the been ingenuity I around for organization. to challenges amazing uncertainty. this a they results, to world, partners. Due perseverance and start and and customer unique our From proud to of they've successfully of and I'm of this to to navigate react like

Our we while as relevant utilized customer remained XX% down lifestyle speaking total agile strategy them and needs. management to to their the We quarter, Throughout providing our our products aligned QX company last lean inventory revenues authentically year. and were nimble. compared with with

profit Our customers our improved clearance respond and promotions XXX points favorably lower with fueled expanding gross by basis rate AUR. and

cash we the also an expenses, near-term And with to operating approximately operating leading strategic We tightly quick This $XXX managed operating ending years. fund to and decisions $XXX flow, critical long-term investments us liquidity. generated continuing of quarter for million $X.X cash QX liquidity, on of growth. future leverage to billion in unwavering on while with make and equivalents empowered best X and of expense million focus strong our maintaining income

last our and our progress we to significant the and reducing we've updating transformation we leading investments strengthened and digital capabilities, differentiators key speed on several strategically been to in Over our in supply including initiatives, including transformation continuing foundation our efficiency made entire square and key initiatives, have ability organization. and processes The pivot experiences, improving years, investing as systems, in-store customer the the chain, our of execute increasing against while brand our into positioning talent engagement. our omnichannel evolve pandemic in footage

the same our thoughtfully customers, stayed as call. with customers to Throughout, time, solid deal continue has calls we it. close to and justice responding When we and At have like our been and in associated digital pivoting have of global reality. social uncertainty and the struggling us also back-to-work time, the impressive messaging to physical, of and will that conservatively. look social marketing, the with the by enabled or May, have QX engage to we've back-to-school Our challenges this with with roughly XX% they At growth. foundation to COVID-XX XX% and of productivity and quarter-to-date continuing were product, QX encouraged we adapting store our last their half stores show base in back our results, in to spoke we operating planned changing opened inventories mental at with and align with

where opened restrictions the of is quarter which of today. global the consistent base we more our quarter, the progressed As and roughly is ease, At end XX% we with open, are stores.

are to decline by open, year-over-year in locations. offset reduced our Similar at improved hours global we partially conversion. in many traffic, continued store operating experience Although QX, to of have

safety to priority. close has top times open As customers' our of we and and we associates at remained a the continue wellbeing community select stores, and

will to reopened store XX% stores of continue on our U.S. digital ship detail has smoothly demand, size reflecting performance spent provide shift while We by channel, the end quarter. adding roughly by our is options the also from more per business which fulfillment inventory our store. We've base trends. available reopening, strong. remained Scott pickup, utilizing across With of by store

$XXX traffic, as the We Combined spoke visual that well robust to we're directly our visits total rising in as issues and XX% customer each double-digit and website social conversion app to with quarter. our visits alone gains approximately million, COVID-XX rose For XX% raised XX%, facing. month about AUR. to quarter, grew the over highly sales the with in app on improved

highs classifications. Our many two-third excuse of hit our month QX honest in with categories, must-grow must-win, We digital QX [indiscernible], strong lines record [indiscernible] digital quarter. across resulting with sales. achieved combined we of our over achieved Abercrombie's, Adults, brands record including of every sales. the digital record relevant Abercrombie digital me, all sales in growth new products, Kids

year. of fiscal over channel we a digital entering XXXX. for a The in meaningful at reminder, had a business this As revenues one-third $X billion accounted roughly our

growth from on items awareness. assortment engagement We continued Hollister, in have infrastructure enabled up and high must which rates strong outperforming. off demand. our platforms with global top quarter, had center to to focus distribution and keep benefiting digital architecture solid with place, brands At has and us in pay and the our strong Both digital have lift XX

across [indiscernible] full popular, pattern And denim category, while fashion genders. content to especially highly remains well lace Lingerie price. find proud shorts, where I'm girls' we were resonated. in customers predominantly a sweats, performance and Our competitive also our of including

On our side, brand, is the XX% say, biggest must channel. revenues in with Hollister. and sales At have over guy of that remain to confident growth It strong. global in experienced growth multipack digital our in swim growth ahead. performance we store graphics, shorts double-digit tees, average were Hicks, XXX% we by lies opportunity the lounge at roughly our XXXX, Gilly extremely representing the Needless encouraged and I'm QX

customer Gilly Our intimate well as Go, our our new to embrace continued lounge asset company offerings. selection, as

cycle, life about of as excited white While we we still team, are Gilly the customer's continue to offer lifestyle early our space on its global focuses needs. products in that

shifted and authentically in Gilly Hicks, we brand and away channels storytelling. customers. well-defined stories Hollister assortments across a improved promotions the spoke and to into our that For had messaging We and from product clear

We and topics on champion. with also an mental pride care causes focus they emphasis we about two most health, the on

in and of campaign Pride new quality well-received. [indiscernible] was diversity Our support

Dixie denim D'Amelio. quarter was TikTok Charli we featuring back-to-school our launched campaign and the As stars, closing,

and align Hollister with the respectively, [indiscernible] person They're million are million followers, XX social on million Instagram. team. are the truly you to the equality. Dixie Dixie for We not followers, the TikTok, thrilled on and almost part Charli who roughly have of and XX causes media our And of customer with including Charli They and we followed popular is those as on anti-bullying has XX most million. platform over across with XX and support,

Bill testing Lab a Denim one Hollister our unique in our celebrities, wide, styles of to brand in Pugliano, ambassadors, with favorite partnered product one they of Noah social recommendation. first back-to-school, business Hollister our For influencers and customers' Nye,

the In created #morehappydenimdance addition, Charli challenge.

into the improved year. Since As take have Instagram, team and million to the we've Volume are dialogue also billion partnership the X stay traffic honest impacting that additional Hollister's throughout events [indiscernible] metric, Monday, launch, encourage campaign end the tuned their does our Series, over collaborations back-to-school, our and remainder and I we of current you views of X of with with members where not had tune Charli and Dixie that Hollister stories redefined lives. submissions. X.X for but this video and with experienced worldwide

been lot about excited Abercrombie a be there's Hollister, not still. to standing has While

knit Our business Women's A&F skirts and also in omnichannel short, tees, Men's our sales tops, multiple swim. strong product had acceptance are including shorts, and growth, signature categories digital with double-digit growth fragrance, Fierce. jeans double with

volume which one is line, For key our collections, resonate. our of both is continue to driving genders, which our, softAF

well-received. marketing and typically continues kids, our Abercrombie summer driven kids' shorts environment are and price our be At addition, quarter current campaign. including In up and by selection the to summer An about annual campaigns and to our swim. Abercrombie show adults' heartfelt was our essentials, second for in conversations this and thinking price celebration. But all fun-filled order of example quick creative customers. is this requires properly some performance

also accomplish, that like especially series, across Our was celebratory, racial before for of adult our of closely and Awards $X supportive video the on authentic, community well bi which in marketing congratulate protest see million LGBTQIA+ with work pivoted Corporate on rise the equality launch, its and work site wait we with team and kids Project, Pride our had supported conversations our focus donated important social our with cause, Initiatives to of our Trevor Social continues recipient of what brands, two over an the important and being response. recently channel in inclusivity. that for combined organizations of Marketing. the role I'd of but messaging Abercrombie the both the I through [indiscernible] LGBTQIA+ posts weeks positive the introduced can't and our we to a quality to highlight team overwhelmingly to together team as with customers [Indiscernible] many customers, is part community. as conversation, of with, for Silver and have Halo the to marketing closely Product

customers governance product launched to positioning. cards Throughout continue social service our kids of to continued credit extremely the Hollister, for we have which environmental, the we gift I'm recycled and adults continued brands with by receive clothing. campaign, holds. about gives be online encouraged while We be protection to sustainability incentive to work. our credit what At A&F future response partnership, our and ongoing both excited also our quarter, so brand pleased and the evolution

across levels. was store the our continuity building traffic this and many considered students decelerating from start scenario And planning, We've and study past July slower country years starts prepared the we for. beginning a Before key to virtually. discuss year. very I I'd this back-to-school settled over markets, call our to With Scott, clearly and which to the like take California, Delayed a we've COVID-XX season, Florida to early U.S. spike, turn Texas. back-to-school and the different school looks minute experienced with their from a including

bought year-over-year warehouse Over proactively past even We've assortments more respond retained our conversion favorably double-digit [Indiscernible] Quarter-to-date, sales slows. and clarity more and customers digital to has the maintained several new our during fall the omni and focus between products. months, experienced marketing we improved to conservatively, growth. inventory to as timely and trends continue have and we've our received omni improved virtual. and shifted school physical anniversaried the back-to-school week last mix customers product year's strong Recently,

that seasonal. Looking we becomes optimistic the cautiously into throughout more the will as the back-to-school extend ahead, October, potentially selling country September, seasons and [Indiscernible] and are weather

quarter, of we largest not sales which month. all in some, lost but August, our is the historically to For recruit expect the

XX% in in are our environment, growth continue our store and still Despite planning vehicles, to XX% is such, that. brands QX significant that closed, be our and As with for partnered our QX, current trends both believe down With I domestically to of XX% behind slightly California we to consistent base opportunity internationally. challenging trend range. sales the roughly

have that this side. year even of other We we stronger period well-positioned made come on to difficult to are this out the ensure decisions

a chance leases XX% As up to our of are have roughly we for approach address year-end, that we renewal.

deep and set the we footage occupancy global the level our a increases penetration, our requires. As opportunity digital to omnichannel to continue business realize this in ongoing to meaningful successful square us already gives

will strong a and long-term strengthen the call to balance turn financial diversified invest have to omnichannel the and in leverage we'll with And a continue flexibility global retailer. to We over position as sheet, Scott. including foundation, I solid our that, a our further

XXXX we and global and Thanks, achieved partners. Fran. quarter of our operating to to million thanks since start I'd second a adding how vendor huge of our proud incredibly teams flow. like our cash We best $XXX I'm operating navigated. by delivered income

XX% improved Hollister, down XX% for Now Abercrombie, Hicks results. for on By sales of to which to By million year, in region. digital sales the declined QX last kids. XX% XX% traffic partially region, in smallest remained compared Net brand, sales $XXX net growth. last XX% Gilly XX% were Store and which includes and year. as APAC, includes in offset our by net below XX% and declined of U.S., EMEA year-over-year conversion

at specifically Looking store performance. reopened

store saw subsequently an the experienced global at Starting our prior market, by down roughly July, period. region. acceleration decline June May XX% largest quarter year Breaking with and was trends trend. By U.S. Second productivity productivity We a of month, by U.S. in the further in led

the the last imposed were We store quarter markets, did a at of took average, mid-June. of productivity last with generally the XX% not year. UK, Second our our our the In stores EMEA, days Hollister the Hollister was roughly back-to-school one-third of kids a adversely although landlord and penetration, down roughly quarter kids, step improvements in XX% digital performance. resurgence on restrictions approximately productivity business XX% occupancy the few market, majority XX%, on at has European of In open our operation. due back-to-school stores to reclosing COVID with By U.S. were was the of have all in by to base laid for the the stores We unable open, with end with On June basis, a while outperformed at and stores in in open APAC, and of quarter productivity in back XX% quarter impacted open most year, school the in the and that of productivity end. brand, store locations largest U.S., A&F July of and our our back until at for higher more of open government which start early approximately the of stores historically global throughout hours including quarter. of California, key XX% country. of was store ended of realized into

preparing actively As and we uncertainty mentioned, back-to-school have Fran in spikes the U.S. been for COVID

is couple We strong not have the performance We've the We of off-guard response more issues back-to-school have reflective our to over do been across product past caught also improvements of the students new weeks productivity had shift. fall. brands. seen experienced have assortment by digital visibility not for believe and as

in have the back-to-school into their start September. it to past continue will the that dates, We believe as season most schools last well than longer delayed has some

Moving on.

was up and basis We levels was Our gross positioning. a comfortable last entered with QX This profit our improvement points X% rate are result to of current AUR inventories XX.X% and higher XXX of last year year. promotional clearance and down year. below with with last

Our inventory. managing the job teams and amazing on-hand an done on-order have

on has Over years, product to have times. the our of development the speed agility adapt improving to made several us significant progress and This progress past we enabled lead demand. in calendar and changes quickly

fluidly down $XX expenses general projected of in of rate and last we of the included was a income reduced savings, was loss Net will $X.XX noncustomer-facing The and reinvestment sales. enable second start higher from charges year result compared basis, a $X.XX adverse $X.XX million costs and or operating conservatively impact driven Stores exit driven increased distribution We will profit related and back Operating last our an loss location, was on the charges last our basis, $XXX anticipate as was activities other administrative marketing share that with for expense impact I'll this were last increased related by handling no decreased adjusted the chase. and balance with Excluded our channel, are center that impacted non-GAAP by exit leveraged There COVID-XX. store income, excluding closed of dollar effective remain store currency consistent, Marketing, digital to now look last in on points last exclusions certain managing half, our compared on up our optimizing expenses payroll pretax our and year, fixed top-line, and FX. or which variable results We as year a tightly primarily the gross in-store charges a and year. rest of charges level points results customer-facing basis in finding Operating income asset million compared non-GAAP are areas in year principally flagship business. a $XX reflecting are of lower we adverse the year. flex stores Hollister expense adversely expense, $X in a Operating These other inventories, from we million to on for dollar year. basis, by store rates mix partially to results $X from a controllable million payroll XXX digital reduce shipping remain million basis. from and to initiatives. distribution an year will SoHo to X%, to to included continue to in payroll, was including we the attributable decline QX. which changes $X.XX. open. cover store occupancy, charges million $XXX business expense impairment to remains last flagship full managing year constant assuming additional and of million the of XXX $X.XX. but results transformation demand by the for a basis occupancy, expense Overall, primarily exit believe than per diluted throughs. As capacity back goods to positioning ongoing costs. to shipping benefit approximately the store continue was sell With uncertainty focused we to half, on $XX not tax on flagship goal offset

notes, total equivalents approximately stores-related balances our outstanding well the in mature improving as $X.X and flexibility higher-than-average to uncertain in sheet of term on facilities plan cash liquidity with balance extinguished and term in senior obligations our issuance to These ABL holding liquidity and billion. loan $XXX which to will million $XXX as position. of XXXX. preserve cash million secured mature In XXXX, which were quarter of proceeds facility, ended set July, completed underneath We Our transaction of we the The repay used fees. environment. the this strong. remains near-term loan We existing cash was

part with attributable maintenance of and We important not. investments they continue the that about right to are year, size we believe of right half stores be and We that capital economics. location a needs. To have XX digital, million attributable with other that of while and omnichannel that and they approximately must meet technology to have stores half experience, expenditures see $XXX still that the but date, matter the opened X stores brand criteria, closing the that the the right to

X/X about we As over which XXX leases store base. due, we year-end, look represents our of to coming have

to and We will our hold continue path forward. beneficial a conversations find landlords mutually agreeable to with

whether completely we'll have have excited store progress We through closing or be optimization, and will walking we to evaluate all We're global options, in year. the about more on stores. and away move rightsizing as it real estate remodeling or made we the share

a dividend repurchase remain we this the in our the Due uncertainty marketplace, only time. Lastly, to providing programs suspended. heightened and share outlook at sales are

For we the QX. the consistent are business sales QX, trend planning around with

assuming not. cash we will cautiously will We flow, and but manage the it expense trend optimistic that will improve, are

to inventory, our improves. demand chase in confident are the have if plans and and marketing ability We assortment

continued matter turn ability kids adults. ready Looking ahead, demographic And initiatives thoughtfully on way. progress solid and a our from a the we operator, strengthen caters be are obstacles that thrown broad customer in retailer over sheet, confident questions. global company remain ability with as transformation balance With to to to specialty post-collegiate our our no to we pivot may I'll what for it the and that, in to our our win confident

our with first [Operator Jay Sole we'll Instructions] take And UBS. from question

ask just Fran, questions. to two wanted you

by of quarter? surprised A denim strength everything lot of the the First, in athleisure. shifting toward were talk you about

and to about is or the you more -- so year, that a vaccine, things surprised do early how to were going sales that. and the not to going you're a like to of And given, going a secondly, sort if able of the you you thinking did. next much. there's planning still we're your differently part merchandising think people plan conservative it back for then be and of buys you could differently, generate much look different Are Thanks are environment, work kind people like? knowing events world you thinking what So

excited very were business We about morning. good for Jay, denim our Hey QX.

company our words making in assortment everybody in a think is of we keep and that favorite the that balance very sure important. my is one I balance knows

did Although into a we merchandise. shift see and cozy moving the soft with customer more

very were strong their them to denim is. really We business. customer, the close responding stay We also what and very understood have a to our They products. hearing mindset

really to would seeing not for close this entire year whole We surprised customer has regarding been then different. point, year, knew longer. cadence that, And at So example, this once started summer throughout at are next staying customer. our what COVID our last the all, of we that is

we So, in later. our years. than little seeing the and recently, and more strong sure started bit starting to out floors really acceptance. in back-to-school, swim we do past normally our product But longer as seeing happen back-to-school a merchandise, tee flow we to we with same on that merchandise of make cadenced thing now We're shorts have our

to going we're as we So products learn year. the customer throughout our cadence more to stay and continue close accordingly to the

sort later clarify maybe third we can especially of your later. sounds of the Got expectation started breaks little weather bit like to for obviously like guidance, it. off bit arriving for then saying a And August that XX% a just little you're It down has weaker, sort the you if within to season quarter. XX% just expect but be if the

misunderstanding -- to how in of what October. sort and about plan that's August you're that? and the is saying And happening get to whatever And up to September am to Or I you XX% make XX%?

No.

of seeing the end beginning of a more plateau a decline the for We a for correctly. extended much September at August, back-to-school, like spike You is would and see of back-to-school, What October. more what just call July we and quite and a and I moderately of are we're season selling an our guess, through I and summer then product. understanding longer it saw

Got it.

much. so you Thank Okay.

You’re welcome.

ahead. We'll you. next to with Thank Lejuez go go Please Paul Citi.

the you as the about certain then side, XX% relative Hey, grows you size, And e-comm profitability coming Can the the holiday do Scott, flagship opportunities. talk stores shipping out do channel to you during would heard of it you you if about And could you of Maybe in able surcharges maybe said real that specifically thanks. curious locations and up have you have how for faster also in estate the to of address and Thanks. work to previously, to do maybe year? than if But to expect the on season? could renewal. rents handle last get been those? talk stores about remain, opportunities the I down

Paul. Thanks,

of I'll I grab these. think all

last with channel, to start e-comm the year. let's So the the and size relative

is on little thing we a channel about e-comm profitable highly year last bit this the one channel actually The a year. our X-wall e-comm love than So leverageable. profitable more is basis and

world. we but shipping, you're bring of some along fairly sales fixed that through of pool around assets the do you a the distribution our As centers variable there, leveraging grow

in saw we channel about So really excited what through QX. the

Let's see.

in It's each up as to the our holiday We've busy been of to seen closely regional that carriers. have surcharges. carriers. new there very be on the adding fall in get shipping We've the Yeah, going holiday. been to we close with we season sure for Moving news. working

the I will we as we way savings like to And P&L. half. there dollar, The baked surcharges can, back of how think So dollar about see our A Like mitigate said, a work of that's for goal with much flow as to but we'll expense it. into we those to some we're those carriers expect surcharges. those is offset the with and the planning rest is across the through.

doing around we're So expense. work great

about for we $XXX of where plus every mentioned surcharges. that. offset in last from back to we help the million like on out remain that more looking were we're expense year. And quarter, of Going the to track day, for beginning we things We took

real what We've to we year. lot a this opportunity Yes, we've seen nice learned estate we've year mean, opportunities. seen the I so some on far a Moving with this have in occupancy do great talking saves variable occupancy. our to to saves seeing a and of on landlords work. working really about But lot been need years. more for with some this this we We've date, the COVID.

We a on X% reduce the company over more square reduce reduced square have about at there's years. opportunity to And to X great per past this definitely of occupancy, footage. year average footage We've come.

the excited we're So we about and location. but right back have stores, the going right We the half. economics, the love what we're size to in have see to right

do. tons of So work to

new to at to flagships in the We have Nothing exiting last report a great opportunity committed remain point. this at year-end. And then on future. the question, We on flagships. our

opportunities current find we'll stack, and our X opportunities in that's the to year continue leave to have We to this in future. lease flagships try

We'll B. with next Anderson go Riley. Susan to

wondering, give back-to-school in guess, how levered year? a what just, to wondering was And then materialize I around back-to-school are won't you typically category? you it of to I just this pieces quarter. business was that color the third I guess, there your sounds little the be or you up makes maybe business expect that I like back-to-school on it if bit job of prolonged, more are Nice And quarter. but think the you percent could

then it Scott. and over to I'll start, take I'll

into much actually it happening realizing we're that see are be do all our and weather kids shift the September, Once of what a always is for going reality October. and but setting longer seeing shifts, when the and do August that back-to-school the from anticipate but customers' mindset well believe the we're We in delayed already is to like potentially back, as starting and school changes the but they're that if now see we up, largest that that month, discussed even we them. virtual, we the is don't it or to making expect is shopping habits, So run getting looks into longer. extended

that So at those that. our And closely we weekly customers can basis. are in responding That and is shorts the what to that the a can that make very regular working and and on throughout tees floor evident to accordingly, able inventory able cadence we do margin keeping so need and teams is we've kept continue be. our chase we're price going the quarter. The swim on were our where sure inventory cadence been to lean to through drive we longer to

and follow-up in Great. That's but a in the also are to helpful. half, on guess the and promotions. the back just pulling margin thinking be gross I quarter the a then guess, back holiday quarter back-to-school, about you given, period. expecting for it guess, that on nice promotional? Are how I the prolonged And third I you the job

this a haven't mentioned we we then see Fran It's margin grab our supply, is Gross outlook obviously for management. gross demand great one. conservatively. we outstrip given and Yes. half, Scott, have opportunity I'll back raise see we about inventory but an to planning if And it's margin really the inventories AURs are expansion.

to gross year. to like is inventory. on and gross half. how those able It's inventory what we're We're conservative Around their We promotional the P&L, demand. what manage supply want to and think going expansion the we going how the And So across does you're industry have seeing able margin every margins. in but going to approaching to back that absolutely. companies raise QX holiday, been delivered really tightly that be have been to AUR. We about expand that's to be It's it's margins be I the and expand promotional.

it QX. camp will the on QX, we're uncertainty camp hopefully, out QX plenty top in but so there's And of in and be in there in And line. that that

just manage through we we're So day-by-day the going it to as go fall.

We'll next Stichter go to Jefferies. Janine with

want like Just clean. little a like get detail sounds it on you extremely And to you the enough. more have inventory, feel

have little to if could a inventory light where wondering any don't like feel there's categories demand. bit you be you Just the meet and

to diligent the very inventory, Well, business inventory time, their balanced the very that point focused Janine. have But inventories are in responding at feel on we this this a in very our been keeping so is time. they and balanced with point team

into very team, can sourcing great need. what a agile, that we have We shape

top at we're weekly to with we're on teams make the sure all the that demand. So meeting staying point of this

about And potential in you to just seeing unfavorable back the I year? a for costs. gross half input follow-up Are costing of still wanted the on ask margin.

yes. are, We in the half. there. solid, little opportunity for costing And cotton the out hopefully, is. The here, getting remains it positive FOB. XXXX and outside is where there. a cloudy that's the And tricky, part get environment of good transportation input the little but been costs is and that, with I'm have we we back costing a But when into see for of it

We'll JPMorgan. Carla next Casella to go with

question. a have I

set? across Can gross or inventory and a expected. about changes than quarter you're go you being talk just competitive as about we better trends your down this your the and talked if the major any promotional You on trends trends margin you was clearance lot seeing into clearance there back-to-school,

But I back They to basis. back camp Scott. feel and their elevated. to is AUR to been comes this similar. some raise similar they've it on were overly inventory past in say, would recent think would case-by-case again, we I past QX. back-to-schools. look say me that and able to Those have don't able the been promotions, I a pull and promotions that been in to companies have manage tightly

I extraordinary the would So nothing of out ordinary, say.

expect the reduction? reduction that had X% for is And rate inventory this year? quarter, The a next the we similar you

be receipts down. will We're Year-over-year, going to be planning inventories down.

come the to top going down to it's So line.

trend And is sorry, to or expect inventory. similar in year, XX% of on we QX, last so I'm make progress outlook last to quarter a continue the which to down with the to our XX%,

points try goal line to and to hundred of couple keep inventory general a we're is and in to basis sales that. towards and make up progress Our down, continuing

one. And then just one last

for reconsider point, buybacks? On mentioned free quarter. priorities share before are terms flow, the looking in in When, the or you free at what COVID, you getting either beyond cash them you for what flow cash of

Yes. line and say. uncertainty, internally. on great question something or a lot certainty talked the It's a It's top I we've would really about less about

great to some We of sheet maturities. a just near-term have last liquidity. I now, balance clear financing quarter a right billion $X.X up did

position. have an So organized we

flexibility. have nice We

year. in you $XXX this As capital million mentioned,

that to We going we're future. have great continue to the make investments in

a back lot of under to we might back year, be the start top-line. the a on But it's half water certainty go top-line, then, the get the So the as and we to we where in that share towards time bring and but some buybacks. see of bridge before about really certainty

all Great. the answers. Thanks for

go Associates. next to Please you. go JJK Janet ahead. We'll with Research Thank Kloppenburg

hear Can Good me? morning. you

we hear can you. Yeah

a Fran, quarter. nice Scott. wondering seeing a a for in couple on you couple Congrats what and I you Great. Europe. was for were

to think that their by your on maybe Scott, I a should levels And U.S., shift? not inventory not demand How back-to-school think about on later, cozy that comfy you I'm are I late. sure. you talked into about, demand that? content And they're we planned have shift the got similar the trends little

$XX for a from Could rent or expense of the we back? the as the through rent year much. while is Thanks outlook that rest is million so decline, occupancy eliminated on the the come P&L positive be year? that rest So, is go P&L that nice negotiating? that And outlook might of you're the the permanently to for the what concessions

off. I'll Jan, Okay, kick

So starting much starts with EMEA, correct. Europe The later. are you back-to-school in yes,

mindset, not later has even started They yet. that really really more In much are a happens third summer the fact, in in much quarter. so it

just also as America business. it's of significant North Additionally, A uniform, kids has so much not Europe lot a back-to-school wear more significant. in

been merchants, the and really Regarding management the focusing on the customer's comfy product. team, response yes, the sourcing to team, inventory planners, the have our cozy,

DNA. So and cozy part is our comfy of

softAF a been has know, in franchise I strong. we incredibly called A&F you have that adult mean, As

to So, fashion. response we balance. keeping are we seeing have but a shifted, a We're also

to Our very or women's ready dress Zoom wearing whether dresses her she's is go on she's getting A&F those strong, call business out.

So we have shifted, balance extremely but important. is

the-- Janet, Okay. on

And the on --

Sorry. Go ahead.

Fran. to idea behind I because maybe is And a Europe, you've current as how Europe, does know just their that product resonating trends I'm are On that? in just mean get effort an of that better? trying Just -- follow-up, put a big

We've at times. had have to Europe. in good The our response countries up different a product opened

So we're things the different country. across seeing

good market response. seen in the largest mid-June. just we've UK Our overall, But, opened in

Jan, our that are there teams getting putting year closer office we opening last about customer. in and London talked Yes. to in the

over there the really we're right sure across dialing the see making starting European the we're in to So and assortments places of distorted countries. up benefits the to product customer our different teams cater that to

Yes. I That's was encouraging, was what and trying to understand that better.

yes. And you. thank there just -- my So questions on thoughts

Yes.

For sure.

question. Moving rent the on to

come QX, closed. will permanent back. And There's store then there. couple some the of is can Rent some with abatements down in in that save, being have yes, million A pieces have of booked landlords. some in we sales occupancy that and rent being have we on So see been stores contracts come expect balance occupancy for $XX yeah, you with not the additional terms save year, year. the as of balance variable imagine, as and/or for to fixed our the rent the concessions to there concessions we

our And these and forward We engaged then XXX us get due, into through is to our with to to occupancy square have make progress store large footage expectation of further and where that coming a take continue over then. periods. leases on to find majority, path year-end, closure we really landlords majority will be agreeable mutually the

to go Kate next RBC We'll with Markets. Fitzsimons Instructions] [Operator Capital

quarter. Congratulations Friday? managing retailers going and are second about payroll, look just approaching especially flows, how tell question, heard holiday other as my talking ahead conservatively. But on to holidays, inventory, the events starting I suspect product some an We've around in guess you're to October. Black promoting between we well, I business me impressive as you

planning just quarter, year I back seeing views to half. about approach least last you. shake category curious to outerwear was curious on how surprise as the quick, the pleasant in And fourth am outerwear, you're your holiday then street. the we at real Fran, how Thank you're just So internally arguably, a out? or the the

yes, so going that we year. very Kate, be to is agree this holiday different

are balance our the business What of beginning certainly this has is mean, of year, as the this Just season. of we year the been. I the in extension since seeing

to I've longer, customer shift we then is going I that this last longer. don't that couple a particularly back-to-school expect necessarily mentioned summer lasted our quickly and know a believe that of So times holiday morning pre-Thanksgiving. into We mindset, to

going inventory our are manage manage of to cadence we our So product our accordingly. and

understand to past drive that December. once working assortments weeks through in us able could in always what's We a about get be that at there's December. our the So really That we of opportunity couple the trough in talk hit we and opportunity marketing. a the industry of peak, great for beginning be to

close week-by-week we're point we're continuing So to stay honestly, very at a different flow, taking seeing and in, customer. to this our what

right on Conservatively agree. Yes. the key word. of the management And word. the inventory, I is expense and It's

tightly. stable, drive the the you is Gives the about could that top-line invest look that For if things do you you that help to the us, flexibility flexibility. can back can as And could flow what investments. we in be the does and and marketing it tightly, longer we short-term half, liquidity in strong. term gives inventory managing for towards things, expenses cash it's managing relatively those very very and some top-line And is two generate

We're in manage We're and to cash So liquidity that we're flexibility do. the business. what that's going going trying and it have tight. to generate to

this half the our one. yes. I'm quoted of At of we all has the as way. Sorry, are Scott businesses, period back same to conservatively. getting just you, And approach planning that time, we'll

We of views our time, getting great we're ahead business. have opportunity currently. to a We test chase so our some that on product

And Mark Altschwager we'll with next go to Baird.

expectation line change back sales recover is Thanks. more Mark. your get is a range? this come reduction Goldberg then And quarter. your expect Should for Sarah similar this structure? in range in if in QX a expected with sales This back I cost decline quarter. sales what reported How you SG&A will come is this the SG&A, temporary we for into as a on of that to permanent versus to wanted savings much

a Thanks. delivered we Sarah, the were mentioned pleased we last budgeting with going on was on company We every looked spend out exercise and the year. the rest we for of savings what at call for went of that the in zero-based yes, QX. that this through quarter, our

see to back do saw results continued here expect we QX. savings in the We with half. pleased in the So

might might long have today. We think of back we in reinvestments and the term not Some be just business that the temporary. as about some

in could we the was be Marketing trickle some that QX. back investments SG&A there So saw in. that savings

done Our Saving house. things marketing that have things an amazing noncustomer back job. of content facing, teams and are

hopefully, has been results protect with there the the Sales amazing. our expectations, there, pleased we in really which QX. So and really savings want customer and front to digital we'll is of that because marketing, see the continued marketing

assuming come we going said, like going back P&L, to So it sales are similar the the going conservatively. half, the we're back. plowing be not to trends back expense manage just in sales We're with to into

So going and tightly, we manage to give That's liquidity, tightly. cash if inventory to be manage good and we flexibility. flow expense the going the that's us

we'll And David of America. next Bank go with to Buckley

in COVID margin any XQ the provide expenses And in SG&A your there second gross operating on just on the quarter ongoing Scott, that the half details inventory was can you the that to amount building of expect question. expansion? second write-down then year? of you reversal contributed Any the

past on write-down. on then David, SG&A. inventory QX. that or in And stayed Okay. impact with QX in reversal QX in due there the question, to the anything That was first no

cleaning it little days OpEx, much expensive operate and stores heavier our these like more definitely centers, COVID operate So the Plexiglass and things additional in our and see that to distribution is cleaning. a you there

few bits So costs we're there, They million increased dollars are in offset here and add the do what pieces with trying a is elsewhere to up but P&L. and these to here. there savings

to good work confident find we costs. company additional around feel we've can and a offset are about the operating savings that we the done that So continue some as to OpEx

Tracker. Shapiro Retail We'll Marni to with next go

light Charli Congratulations on deepened days little love of situation these although, given a in the And know everything. really that quarter, especially how [indiscernible]. stunning

that curious, digital are lapsed Is a just finally as you you customer, online? color is business? If new seeing could the about file that. the So see just And a customer little customer? is did a, talk Very that behind It it you growth. customer I'm strong could is you well? customer? grow moved And put a the store-only

Dixie, of drove business, start. tremendous well. file loyalty. minute. see Charli I'll customer on we as Yes, just customer back file brand a And for strength our based of awareness, the to we amount grow. did that So a Obviously unified, That new seen on and have

pleased those results. So we're with

into shoppers back shoppers the that I'm just were you if you're lapsed are curious where and brands then online come And coming store-only seeing digitally? seeing,

Yes, So stores long how opened. better. on bit more have depending been

where have very, the online time. those We some close seen places of those come for a for weren't stores customers store-only long very

Some of for the whenever those store stores were come to customers waited open. back

the customers. of So, we best some get shopping those That's to silver online. our because one We customers want store-only linings turn them like that. what are those of happened to into has of here customers dual-channel

a that's hopefully, as dual-channel future. silver those So And in we lining nice of out COVID. can coming keep the

I from get we're We global mean, the earlier nicely a stores, up it's as to able digital the build blend the our we in seeing -- and XX% well a running great we're benefiting of because that. obviously today, Marni, we're time as to on curbside of mentioned store. an retailer, omnichannel and be

helping also shop. that's So customer the

fantastic. That's

you AUC so spring? just booking seeing with sneaking and And into as one advantages I are holiday you any more, were

favor. beginning through in We the been bit with the dynamic have I input demand year the you've of towards supply the would good end. seen we've little gone say, the retailer's is And this costing. down. probably as costs, costs have a Really, seen cotton commodity the tilted

with pleased We're that for conservatively we're Like XXXX. good into inventory. achieved we I on continue the half. hopefully, to planning So said, cost. see our back We costs going were

benefits seeing down So on our year, we're receipts to last are those costs. the definitely but

of the Fantastic. with luck back-to-school. Best rest of

Thank you.

gentlemen, conclude question closing does like additional any the our answers. I'd Horowitz ladies to to remarks. conference back for turn Fran or for this time and And and over

at Just until of please call all today. continue our talking for the the forward want yourselves. I participating about to And with in look quarter take to third care thank again everybody to of then, of ongoing progress. our you end

thank conclude you. And do today's participation. your you that call. We for Thank again, does

disconnect. now may You