Abercrombie & Fitch (ANF) 26 Aug 212021 Q2 Earnings call transcript

And ladies and gentlemen, please standby. Good day and welcome to the Abercrombie & Fitch Second Quarter Fiscal Year 2021 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. We ask that you limit yourself to one question during the question-and-answer session. I Quintiliano, to please time, over the this Pam to go at would turn like conference And ahead, ma'am.

morning Good XXXX you. and our to Thank second earnings call. welcome quarter

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

non-GAAP in a morning. certain In additional measures and measures, referring to I will reconciliation that, financial With over the included adjusted Fran. addition, of call to non-GAAP are release to details, issued GAAP this we be will financial earlier the turn

today share ongoing fleet, of our recent networks, work and our brands, weather, and realize our higher to Product here emphasis X-wall we adding the were teams, all results digital our customers insights on included; digital activities. social right-sizing advantage an again, long-term a social. we and the and be warm reduced well-positioned vendor for to acceptance We operating with and our digital carries season. back-to-school during strategic past technology done stores, our outfitting summer, and across start that into support excited to This carrier We since and which growing from near heading pandemic. provide margin I'm our increase regional strong Throughout tightly momentum there expanding marketing the morning. entered than store fulfillment to took Good benefits made several across channel, had needs. spring of investments to and the and was growth. late continuing investing marketing, and in markdowns the and promotions, inventories, technology in managed for an the and their quarters. QX, Once

margins worked achieved best XXXX. and proven since and Our we our operating playbook operating second-quarter income,

a impact continue turn PSA I to lap we just quick to as significant results, Before from COVID.

be will XXXX, COVID do not to where XXXX providing closures temporary - plan comparable We comparisons store to sales. applicable. last second year, driven quarter And disclose due we both to and

we up XXXX. year, XX% Second-quarter last total were compared sales QX was to and to X%

market, performance, down and rose which the in discovering with Results ongoing I'm of well Our retention as up was from a U.S., XXXX. customer customers on brands. proud largest XX% new a sales and X-year global total stores' basis. sales speak from and to on despite led spend, channel, store very as XX% X-year year our By our were XX% closures and to achieved permanent last EMEA. XX% restrictions

store XXX As we fiscal gross base. locations, our feet reminder, square closed XXXX, from during X.X underproductive proactively removing million

should global, evolution operating retailer into Digital a omnichannel sales to stores XXXX our and as yield from XX% grew our initiative, as We did Store beat not shopping levels Global growth, reopened. further further held proof our Optimization of shifting store steady sales continue and behaviors. remained Even XXXX. against margin are to transformation digital-first, skip customers and sustainable with align solid Network execute to Results digital a aggressive benefits. number one ongoing

gross significant Our expansion. total sales our margin evidenced by growth has been healthy as

we the margin best our gross achieved since For XXXX. quarter, rates QX

Our on and X-year last the basis a We a points points XXX depth and reduced XXX gross last total year. basis on to increased promotions basis. quarter compared X-year Company and rate margin breadth of

to to forward. last tight over inventory rose customer compared QX, strong, margin our continue year we performance, not points strong of Reflecting step reaction ongoing be learnings and products points we and our margin key is controls, topline continued XXXX with not and has to basis rate This away from discipline. combined have gross going will COVID the to While apply XXXX to expense one will basis operating compared XXXX. our

results to consumer dramatically their our experience. supporting on also environment, with lifestyle the reflect evolved product, improve especially and we have brands by being in of from customers focused our CEO all good in Since body our needs. done became voice, we XXXX, our and I While have them the U.S., work for our a benefited team global there and

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staying absolutely top Our amazing current teams on trends. of an have done denim job

over get XX% the not our reduced volume, to this last promotions as is XX% from XXXX premier sale we representing styles and within up for our what viewed second of well newer want. below they category, denim XXXX with And the are jeans year. quarter, customer In destination, waiting We levels.

something flare. changing becoming dad smaller And there although the of trends total. wider high-rise, there, low-rise, part working? a are upcoming are legs, new and like for XXs Skinny inspired what's mom, So We and including and lengths straight still is everyone, have too.

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built, been have positive landscape. where teams are digital meeting our the customers our As they in acceptances

our bring We a learn firmly -- to digital-first and and in hired accelerated quarter engagement, committed certainly audiences model. was Officer core to to with launched opportunities. strategy exciting and influencer, both introduced testing Gilly and On discuss want the our and reaching to purpose engage It investments XXth, take our are brand evolved newest and a our Tourist. with to I and Technology test Digital media some huge and an new positioning. position: paid busy the their and digital. We globally accelerate evolve moment purpose we technology of across new we a customers leap brand happy first and trends by Hicks. relaunching Starting Hicks Gilly an brand, Social July forward and place. highlights. evolved to We took to and our in We Chief and growth technology emerging further in our and strategy for both a

important. very the our Z generation, purpose Given the most is stressed is customer updated Gen

As comfortable, everyone so welcomed size part feel new size-inclusive the that introduced can products, identity. materials and of or of gender-inclusive relaunch, regardless and we gender

standalone Columbus, Ohio Easton in our Town first In addition, store, opened we Center

brand customer encouraging. Hollister feedback has to Customer side-by-side love. phenomenal the results store feeling side-by-side very have of resonating truly their the concept relaunch underwear, and well-received. Xth XX Gilly our match incorporate sales and updated is the This within a Ohio, step our product in new well collections. back, accelerate and channels. growth with XX% Go, customer. gave quarter, What locations, and and store brand double-digit the the store formats product confidence already been matching brand the Gen sales Post-launch, across with Wow, vehicle. are Z make to Gilly the existing elements we to our standalone the absolutely customer experiences. been which can to for collection, team, year-over-year, I and of the positive necessary growth active three continued responding the the approximately guys is digital gains. Loungeset backs, to Early investments exciting us resonate and second This moment which from and and quarter Taking mindset. total this say? store. refreshes overwhelmingly Awesome included our new sleep our with rose all is introduced In consecutive what an and

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retail Snapchat a voice our launched a brands influencer with XX a and marketing transaction site drive tabs, during customer Creator on Collective, got the between Vista focus and product, Hollister allowing unit we series, We a the also helping out July, complemented perspective, average experience. Hicks efforts shared users average In Lago higher long further all refresh Gilly From shopping checkout. our new Tourist year now X live dedicated a experience rounded clearly featuring growth. monthly and we have - Instagram influencers. to Hollister commercials. non the shop improving Social with sponsored series app program. values quarter, to strong skippable with the Hollister's on Our

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jeans. we to to in continuing look the the are on season, we win remainder focused back-to-school As of

engaging pop-ups product styling in where markets has been seeding teams highly we successful. key and thus been have far local have with We in

in year-over-year, TikTok. over network influencer, and of and associated We and quarter, increased X digital by will sales also of top In the editorial programs have amplify remain our Denim priorities. across EMEA, grew brand our U.S. sizable affiliates XX% we advocates. already Instagram At adult, and abercrombie and influencers our the second affiliate,

which test, had We also engagement launched took and affiliate a and capital series in insights. fantastic top alpha creators live with Facebook's part shopping

we favorite quarter, can't to benchmarks the on content. new-to-file for leverage During proud TikTok had to and paid media. moment. are important our TikTok's basis, Abercrombie I orders, certainly future platform. PopSugar, brand, hold grew that connecting a we earnings wait sales by year-over-year has our the over according I After and is doubled On visits, holds hardware this women On customer continued we last fashion continued to to all, our the Abercrombie what to new-to-file see paid a All to XX% break breakout and off. call, TikTok's said title.

registered retail quarter, sales Your unit Way grew sales Abercrombie average best our call. features Abercrombie, our Heading average quarter. transaction a customers values the Abercrombie momentum includes is and team XX% its from in QX which XXXX. second kids, women's recently to In built into casting which strong campaign, Denim launched We growth. higher energized. Similar Instagram fall, that the achieving Hollister, with total, During since

and experts, guest also We wedding The best-dressed events on with collection. collaborated a Knot,

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model, operating As technology our a digitally we led talent. into have we transformation and made continue investments in

and welcomed we've year past in teams, the and analytics, Desai family Over Technology and Chief newly we of the the Digital experience, role and A&F data Samir created to expanded Officer. recently technology user our

government moment it Scott, turn and fall our over In season. the the to I how want many lagged COVID from I the stimulus quarter, to to as of Internationally, countries the including market, on Before a the the the of U.S., we related restrictions. their largest reopening are in health reflecting take the resumed discuss benefited thoughts U.S. U.K., consumer many a reopening, ongoing customers and approaching activities. second our

to global and we to We've believe wardrobe. customers As our QX, their the been actively uncertainties engaged pleased remain, while with date, refresh season optimistic. think cautiously U.S. we're and highly looking about back-to-school

environment larger yet to and the is markets We the start are to season. return. yet have see EMEA, season back-to-school expecting improving our elongated many we of In to have an as

our ahead, to playbook. Looking we continue execute proven will

on We're back partners, supply inflation, Scott. it focus we'll and delays. this in our we chain will offense. industry-wide are that, well I to winners to sheet, our previously our as relations strong long-standing stated expect proactively can to on control, With the to global X.X% foundation operating turn transportation controlling as and surpass will well-positioned and and balance production, with we goal with issues half managing We vendor remain our what margin and around And over year. be solid

Fran. Thanks, everyone. good morning, And

disclosing and sales. XXXX we mentioned, not the be be Quarter applicable, Fran where providing both XXXX As comparable will comparisons will to Second and

the XX% basis, base results. the the total two-year second sales This our our our XXX last million, delivered On Quarter. at we of to a quarter We all stores open ended up up to net of with of Turning XX% In to open. were XXX year. quarter, end sales of compared X%. First the

XX% which Social steady, We recouped due sales were this remain sales driven on all of time, total for At total digital XX% store basis same a for of grew QX sales and which COVID quarter. to dollars XX% year. By yesterday, kids. one-year includes on significant Store amount brand, XX% Hollister, XX% includes year, increased of a stores rose compared remains to open. Abercrombie, XX% sales XXXX, As sales down Gilly net and and and two-year basis. a last closures Tourist, representing to last lost the Hicks

X% net XXX QX X-year on to sales and base for our to compared square As basis respectively, U.S. were in QX, X% the stores XXXX, less for net up region, roughly having as Abercrombie. sales and store By in increased and over Hollister XX%, US XX% XX% fewer and a XXXX. compared despite footage X

X which region. product, a a to to on In experience, store rose flagships reposition to permanent stores, results including focused sales with have smaller closures well but wider down promotions we of XX on customers. light voice, and we X-year basis, XX% network QX Customers in local as on were and basis. X% pleased restrictions. X-year COVI EMEA, a to ongoing localized Since XXXX, store were allowed closed and responded -related in us reduce We continue

the whole During region influx we and hours. remains the temporary a as operating experienced quarter, closures intermittent reduced as

but XX% the QX sales As and a experienced in APAC, XXXX, year new region. France region challenges see pleased as in improvements transaction traffic our perspective, as products, as we're are omnichannel trends, to we collections. UK, by saw In including APAC lower improved our and to to continued From response activity. QX. meaningful. the levels largest sales promotional market, improvements customer continue profitability relative sequential reminder, we year-over-year X% to store also last Globally, traffic an values. QX down of penetration continue we [Indiscernible], to down Germany, were while in encouraged with we On China, average reduce were exclusive XXXX, and conversion in high we stabilized In and

is AUC, increased basis XXX across Partially QX driven XX.X% of by higher basis our brands promotions on XXXX, and gross was profits, industry-related year, production delivery current, Inventory by did X% were quarter to the transportation last renewed markdowns. controlled Moving quarter we And points delays challenges, as restrictions well-documented, year. several across rate higher see reduced there ending COVID the Reflecting down countries. over reflecting global shipping of congestion the last on to to increase offset up costs. continued. in and XXX AUR points our

now forward deliveries and are necessary. deliveries, to employing leveraging earliest. Southern closure the delayed average managing X are weeks and on an We been platforming, factories Vietnam, the by open through of September pulling air further delays as at first week which we're Also, extended of working expected in through have of fabric to X

will for playbook and XXXX. non-GAAP get reduction of of leases, square impairment compared up related from to QX, approximately XX.X%. product last renegotiated QX and Operating other year, expense. savings rest this compared saw to million a administrative as operating income in as and approximately delivered a partnerships increase X% primarily last vendor to abatements and XX% pre-tax marketing results offset reductions, XXX,XXX already These expense were driven stores decreased expense, charges flagship ensure as and rent in item. similar possible rose occupancy Compared spend from compared XXXX, GAAP operating of a of excluding and last to year are percentage leverage I'll while increased Excluded performance-based adjusted used continue results and we lease-related million quickly upon basis. the have million compared expense and general, and XXX a down XX% year, $XX with asset non and was income income We XX% compensation million countries our We by a to fulfillment In million distribution strong to last Marketing reopening. - our to XX% compared included other operating benefits year expense an XXXX, associated of store and of in of we XX was in by to XXXX, higher approximately our cover to sales an year. footage operating increased X respectively. to shipping X% expenses. from partially of

approximately previously operating U.S., noted, the the in primarily Quarter tax The deferred XX income the this effective on negative assets, and million certain our X. approximately we of rate Germany, XXXX. since and operating In Second Fran allowances was As released best margin tax was established valuation quarter, Netherlands.

adjusted reflected our quarter for in benefit the of the increased and benefit Additionally, $X - share income $X.XX a acting items on million mentioned. which of tax year. discrete to value a compared current basis the related U.K. approximately non on $X.XX quarter was per rate GAAP the UK includes $X.XX of deferred last diluted to quarter, change The Net the taxes approximately

us enable Our both approximately financial and and and continues cash total to liquidity X.X cash quarter strong to of shareholders. ended of We in equivalents million to XXX invest business position billion. return the the cash excess with

approximately share program. shares total end QX, bringing million, under we repurchases we to of X.X authorized $XXX our approximately $XXX remaining the quarter, year-to-date the million. million During X.X for and million previously the million shares repurchase repurchased about share shares At had X.X

sheet to deploy purchase at a par our In deleverage addition, XX million we senior excess secured $XX cash. notes value way market, and on balance of as open the spent the million to

primarily share continue market share to pending through will investments. price, we ahead, our to cash repurchases, ability focus on conditions, and excess to shareholders accelerate Looking returning

that and half we to continue half related to expect the items. million to and Technology Looking other fiscal estate be XXX maintenance with and about real approximately Digital of related ahead, CapEx XXXX to

year. for of back stores, and stores, we bringing year, closed During period, how landlord having total in the I'll up thoughtful for the up total bringing total planning to we're XXX to for forward size at We we the the with about the have XX. new approximately conversations In quarter, the of to renewal. the expect year-to-date find right with finish we XX XX half remainder right roughly the the a open to right This the year-to-date. partners our leases year look stores opened are to the that XX location for XX XX economics.

We as where come. structural through maintain some in a largest to as investments well leverage global and Gilly growing an U.S., we operating will top-line the growth, we savings continue we associated the react and We're in districts, including and support will expect marketing around the Recently, cost we extended of of Reflecting back-to-school experience, have Social offense New uncertainty, market encouraged our discipline stay in with Hicks see each the brands, and as cost ongoing world. to Tourist been supply portion manage and chain digital results inventory to return read the school across disruptions with to on s. for the our including to it, and back-to-school weeks season. excited in to environment York delays

third the X% we're up as level quarter, to be For to period. sales planning using approximately X% Net as XXX our million. XXXX of from follows comparison XXXX

outperform EMEA We our point, due cost assumes impact plan I this chain larger on continue to from momentarily. a sales supply expect to constraints, coming to which will impact the with inflation, U.S. and cover APAC. modest the At

our basis possible. to level other XXX We basis to offset clearance expected shifting points partially expenses fulfillment adjusted be will XXX lower production costs. Lower freight be drive points available XXXX by including of an expense, excluding store our work income and cost disruption if offset and activity be XX.X%, through up million. single all impact at to digits AUR negative ability higher level XXX to of pressure. cautiously including to will non - headwind. and operating in of necessary, XXX airing this points toolkit, up optimistic the to inventory Gross manage as of improvements through remain basis rate XXXX GAAP to tools to low We promotion using approximately in least profit Operating

across momentum digital compared media spend as in marketing look to social to increase brands. to further plan drive also XXXX We and we

low XXXX, to -- marketing expect in and the We into be to from XX and half throughout the tax rate Looking this full the back the benefits to year. see

as XXXX, to down sales X% XXXX to mid-single to be we - of to to to compared around level X% rates billion, planning level XXX expense, adjusted excluding X.X be follows: digits low income points Operating of non-GAAP XXXX billion. As XXXX to other net XX.X%. to gross up of to profit level basis are operating be up X.XX

Assuming investor we expect would at well for expectations, year, above which day these XXXX the of X.X%. above deliver against operating target our we or margin is X% full

We are excited about the significant progress we've made on our operating model and cost structure.

While about work year-end call. are provide remains, plenty and our we on hard on of assumptions we detail ready questions. optimistic additional With our we're will earnings operator, future XXXX for our that

Ladies like to and question, ask a would [Operator please gentlemen, if Instructions]. you

using if you mind question-and-answer Just please your our mute function reach question phone, sure limit yourself to during session. make signals speaker that in one We equipment. could is keep so released that you ask are a this

We Citi. with will Hughes Paul begin with

brand Thanks. far begin more just the what bit as do as if guys. it more the you're pay brand the buy debt, little I what Gilly thinking think environment curious to be And a thanks, talk debt, half. about have you Hicks and use stock. big second what you expect guys, that Scott, some whether could using back how for seeing cash, back-to-school, as you on long-term? and to still in just pricing then how thinking down you how Fran, you can you're both for I wonder about and and curious promotional near-term about Also 'XX, it Hey, you're

freestanding already an morning. off at We an a past work is really come hard them couple Paul, would We're is test just over this that their love customer, talk the Gilly. and We The helps really Gen brand a the in a that to Gilly. place team with close a learn this purpose were building understand good to building quarter for And years. up It's in huge opened to the exciting get feeling up win. we brand most happy What opportunity resonating. momentum resonating, brand Z has been is We that find that the to product The generation, had has store. Easton. stressed-out of about generation. Hey Gilly. been

we of of couple has took as Just received, an used been some just gender assets those a size-inclusive nice to and well. a weeks Adding the this and and our side-by-sides win. in well really also world. ago, pickup it About have of seen -inclusive from been has all-around XX them the them, around that that

headed We we about number Hollister not declared part we're where and are excited as the today. have of

your think environment for we the the made. second the question, have with thrilled We what's half? are I that progress promotional second

huge being with has time I actually just -- far have you been a us extent this the journey for on our we some have think quite that to thus and able year reduce for huge to win promotions been this us.

to is remain learnings our first coming and said, intend than back half holding more there. half. are We biggest out the The of COVID inventory tight as we we've that's the the of promotional one

but to We monitor expect situation, the to continue make continue progress. we will to

XX the paid million. in debt back million repurchases, as put there, million use, cash put about settle third mentioned the Back bought the and multiyear our And grab our to million we in sheets. quarter some Year-to-date, balance million that usage. piece Paul, to of of you delever SoHo cash share about around to reminder, just to in that XXX I'll some second to on a here We about here $XX Hollister have XXX cash a in obligation use. we then for XXX related QX, store, we pricey

XXXX. opportunity in on up provision believe that here future, we about us. the non-call have up a good comes sneaking can't it's I is think we happening on first as So already, debt that there in that it's debt

will meantime, us to there, point decision buy little of in first that our here, been that's it So makes for so. the in QX. sense a bit be In

year. we going the come the half back repurchases, next to get there in ability invest pending mentioned, we're as look more to business. we of First So focusing price, forward cash usage the share and to and Quarter stock as be into to on

Thank you, luck. guys. Good

you. Thank

Anderson hear will with B. we from Next Susan Riley.

I you back XX. quarter. in like the the you It gross if looks guess, 'XX. been Good highest to upper job just Nice I mentioned the since margin, And historically. the on even higher look think touch on morning. it's

second there's So, if there quarter, margin we Is think for then just curious as to increased all I'm that bit a third just level looks And more and be you margin freight really like it room forward. you that are costs? look just how you're below expecting in gross confident maintaining quarter.

one. I'll just Susan. grab Hey, this

we've since thanks teams. inventory we think past, get that in promotions. And let's But different Extremely back through I design XXXX So a yeah, a product great, made and don't just very was merchant progress has to our ton COVID peak. part learned XXXX. pulling back on with of it the pleased Obviously, than about we levels. gross thinking highest see and the is on about gross The and been are we'll second our the margin, and huge progress Thinking acceptance back great making about, business question. today. the the XXXX margin. to on Thinking

the expectation margin for second. Yeah. gross third-quarter The

coming back we the to third into on us Yeah, the freights bringing are Yes, seeing quarter. it increased third quarter.

in to up booked then in half, flow here gets build your third in that to some here started the we'll quarter. of first it the through that inventory start and So

transitory but the versus So, of happens. freight be in itself future. we XXX QX, XXX sort about the to little XXXX. But a hopefully that's that from up bit it out baking in XXX points down is see thing inflation we're hopefully will that talking And pressure versus points basis there will will basis still when great

So on the pleased really gross margins. with progress

back Thanks half. That Great. positive. lot. a Good luck the sounds in

Yep.

Jay Sole UBS. We'll now move to a with from question

Great. Fran. Thank much. Fran, you so

are of lots working this think You category? of So few sense X% for of can at you in and rate in for rate growing newness secondly, fashion has And that lots do Do words, mentioned X%. a pandemic it -- styles and Can before was quarters? meant it's other both what give a if the trend us you now, think now. that the men's. you the persist denim women's more growth you there's XX% growth think at growing for for

Hey Jay, good morning.

for continuing an such often between talk newness long denim, doesn't very denim, start many low-rise XXs the The leg It denim. see across so into things openings, happening, we long, this mean, the trend there's been what's on will the this -- for across genders. happening where and a and time could there. are because newness they're that newness exciting the incredible high-rise, just happening future. so happening. sees and about all see go just expectation happening I we around are brands runway is that They've and exciting of about in an I what our I is things all influence. skinny the decades, could the happen well to of in to so on jeans great expect and industry So on

are given to Abercrombie, on the like last you about positioned, five if you marketing really really to KPIs maybe you're implies of really work want increase different Social how be then, that over Hollister a the and and and you which What that brands with specifically and you talked engagement -- consumers? big to in you're sort to Hollister the Abercrombie all in brands. way And the are that seeing it. where Hicks, already positionings, continue Gilly years, tell be, but you've that are Got the with three these ready are Fitch increasing you're looking put invested also some brands all expenses, things, Tourist and doing and

of Hey brand of Jay, X kids. this loving brands. where X all I'll the them, each them of one. grab positionings are All Yeah, our including for --

marketing. our seeing increasing from more strong fixed it's store and and sheet cost, to what the are move across The is great savings is spend we We that the with years, trying balance over that been variable, into we've more we it. base, to marketing to variable number cash do a have having and love expense position X

more for teams so teams to our all drive customers, that. happening like retention executing social we our the firing put that and drive across love money been we earlier. them built So, we're are give on so want new just on Fran appreciate what's that and of that's and brands. forth. all what digital. said so seeing explode we across We're to And we we on and finding want have fund TikTok And our those can work to cash to new partnerships. to And marketing. brands KPIs across We're going cylinders, great We have more

Scott. Thanks, Great.

to [Operator Instructions] Matthew Morgan. we Boss will now move JP with

the congrats and Thanks on Great. continued momentum.

Thank you.

to up about you some net that how about as maybe puts X% And to to maybe relative the the margin to So the line relative Scott, second-quarter it we are sales think this best maybe then forward? takes, your moving seen cited? continued best in just what and peg bottom relative August, operating think XXXX, you of year, profitability, on have what or to momentum how

Back-to-school brand, we I And it Abercrombie, momentum the and for August. ' are pleased call seen we've back think Hollister the we because, fall. that to really heading with into also kids

really and product. like it's and Georgia start nice girls nice and The seen Hollister a back-to-school. early seeing We're states to have focusing to on the from back-to-school. So Texas Florida kids reception

back-to-school. slow right? nice steady a activities a guess -- longer talked peaks season big we're is we've these country a time past, that then expectation the consumer and looking and for spending about we've and as So their Our throughout was bit social race, states I seen In wins That's back the valleys always the for the and year. this to. different they vacationing more peak. The that got lot a

lot more seeing saw more we into and them selling. So now go a wear-now we're wear-forward selling

about far. excited so what we're So seeing

for into it's it's through of and puts levers year. this and year And occupancy down and fulfillments, us, takes store coming three expenses. profitability, the this on then it then significant taken amount the to it's comes really a for out And marketing. we've

reduce make see to go stores, other expect close we come we stores, continued And occupancy improvements whenever We store forward. savings through in a as do expenses. with we

amazing and fulfillment somewhat. the the in the spend what to But really we some more we've then recently to seen, that accelerate our offset future. side, will seen we've And inflation grow think specifically, there where those out volume, see store can great that of the is profitability is continue how we half, seen we'll want savings and On marketing seen the the we've higher grow and when thinking that's in flow-through plays that we our line and see about XXXX flow about three, through. to in and an top we've first we talked here profitability see that the plus QX, goal-go topline, that drive to is so can forward brand I because elevate just that

question Janine We'll to now a Stichter with Jefferies. move from

cadence Hi, the expect growth maybe you U.S.? you a reopened; just going to the sales improve was bit and XXXX. saw Would complexion quarter the the good the start about sales in would the Europe within then interested of a the I guidance Thank that, to X% morning. you. in moderation of in there. to what I'm as And versus curious stores Europe ask in

grab this little - the to QX. X X one. bit, up ish QX, in in - back history about X X, I'll go Thinking up Certainly. a in ish

in certainly And so people [Indiscernible] optimistic we're that been We're hopeful start a vaccine in what's little same It's the so slow happening will has couple reopen. QX. continue out get that lagged here right A will bit here happening things rollout reopening. Europe and range around It QX. of more. here optimistic in to will and slowly U.S.,

chain have it of side and other we the challenges inventory challenges that is seen. On supply

in of we and here to in hit the dribbling of expect So we see kind little there as a inventory quarter, bit is a go through QX.

exactly be. Our to where in-stocks want them are we not

our to thanks doing our here to products power, and we're huge everything in possible. get quickly transportation a as teams So as our

kind it are where we've of been for keeps track with and us the things first in on those half. just balancing So

Okay. of underlying a XXX how trying Did curious margin the Great. in And or to quantify what the you're expecting Just saw in on half? that what XXX versus improvement Just either in you of merchandise what sense you half, margin, points the back get that gross was freight. basis incremental then XQ XQ? first the just to --

We basis didn't in I'd drag say from points the freights. XXX a QX, in put there, of but on margins couple gross

isn't merchandise the a margin the great really fall. cost and as rates. thing start been So, to we growth s, underlying margin, We're you pressure. framed and -- all we're a spring selling flow offset AURs marketing, that -- bringing through drag it's a acceptance seeing that seeing, It's it bit product the the together and inventory, little to is those as higher you inventory in in working great the here the know, see of but product you to and AUR the how the how that great through see we're

expectation there. we'll get whenever QX. that's so our we in And QX here And update

so Okay. much. Thanks

a to JJK question moving Kloppenburg Janet Now Research. from with

Hi, me? everybody. Can hear you

Yes.

Congratulations quarter. on a great

you. Thank

of relation about as if in think Or you these worse, the think particularly pretty trying the from -- the sort should productivity get second, feels are back little actually you as we and Europe just about be ask getting just Are to think business we the there the stores. second bit things a too. discriminate we to levels. transportation U.S. I constraints that improvement mall-based the year? to -pandemic to the could it's should quarter the pre how some quarter. productivity worsen you next wanted it getting temporary am we chain continues you get about just to wondering I e-com like I and the how levels And Fran, think could XQ, One, and model supply and cautious headwinds, understand in or And store through and stores, but Scott, year rest think steady, costs, maybe quarter, you between do of do in first the into the move fourth I'm Thank and could right. that the you.

Okay.

U.K., had seen more earlier, largest restrictions throughout throughout productivity see top, green -- starting continued COVID And to from shoots our of we're is we're second some than levels the as countries, But which lots EMEA. we consistency Clearly, productive that mentioned quarter. Scott Yes. to whole EMEA. and currently bit EMEA. excited restrictions little particularly a has We've the more are the So across country U.S. the the starting the

We U.S. big win. the stronger has the big, in in and XX% Being our as pleased -pandemic performance. productivity So with actually been levels U.S. total. up we're see a very pre

to back -- strong, answer. that question guess, let's look getting sort I Doesn't -- second same see. of Your

stick, -- are big, of initiative It's very and sure the on focus been we right stores on leases, years our the to for are in size. right that before continuing location, and got and closed economic, XXX a square our we're I on and since focused out a half big it. ours right coming We've continue Janet, a of We point -- closely continue the now, making our the mean, Hollister, out over I took up stay just last Scott. as the We've and stores of to leases hand million base. back in we'll that. feet to lot

in of are most the business. of our stores Europe Most Hollister our have Hollisters -- in We

So you. with over I'll to turn it that,

store I'll last traffic I'll think one lot about and take malls on the a have regained a when but about bit little there think normal you that traffic, about just we productivity from new store whole of Janet. When XXXX, and malls some haven't.

make holiday productivity seeing better that We'll to how so these leases stores test and Xst on rent And levels learning -- drive that. through coming have looks we're of it level so store, understand sales new what store season to the say sure deals either fits of Xst to to that way, and continue the where on those the kind of not but solid, will average. still productivity stores versus we that And get that definitely people on get our settles shrink and forth. in. can I'd And -- the so was XXXX. to traffic we're Fran's and back-to-school And all flexibility traffic levels back really be our was that and we point, for back a that in

now, be us tough hit the real, the in it's supply QX, in of you the are it's through those in inventory. fence are QX, All to September -- think day. some Those is And us of it of put we us QX. that articles and are this going side every and there, that QX. in thing to getting in QX we we're hit hit in costs out. there. that. of just there'll there, or point. the right our control how constraints, it say but I'd baked comes we'll the here, full-year about one going at us I'd It Vietnam on the this that those air it's all On have read of out And outlook living kind we plays Out see chain out thinking say our as that about units we're into reopening with the early along

so Thanks. much. Okay. Thanks

You're welcome.

[Operator Altschwager Instructions] We'll now move to Mark Baird. with

congrats Hi, for on flat in taking significant despite on the see sales Thanks Mark. Sarah for It good is our morning. hold the and question strength This XXXX. Goldberg to was quarter. digital impressive

and fleet Now, optimization curious I'm forward of moving would just trends digital these program? have then you're how they any sustainability on implications thinking maybe that about further the

I'll start.

Go ahead.

Okay. happy our coming the will one to big reopened. Yeah. was as through hanging with the going sales kind off whenever That I in, very the digital world we're what learnings in kick chime the was but stores happen digital U.S. is up. this of first one specifically to can here of then Fran reopened and

great we sustain 'XX jump last versus So I the of and being And the back XX% finance that greater at in see that this with digital was perspective where is did that different digital to in wasn't. see flow last much what and mix it flow to and through profitability P&L to fleet love with to operating work through the model our we it of that the COVID-related closures, huge year. sales because that saw year year sales in

we I So now, to a we certain that stores going market. to about we think forward, sized the within mean, omni implication maximize omnichannel as that's is entering. want fleet. market need locations each business. on have store to right it make We sure the a an this right business we the And have and how look digital support that bigger we're about does halo at

XXX year has half into So, when for this we'll an implication have be go back renewal. the about absolutely we we that leases those up as of it thinking and

Great. Thank you.

today. will additional back to any all have Fran looks I remarks. the for we questions that's for or It over time like closing turn call the

with look November third-quarter in in for participating you Thank I report you you. to we speaking forward when Thank call our results. today. our

do ladies gentlemen, this your does today. for participation. for conclude you and We thank conference With that, your

may You now disconnect.