NEW YORK — Attention to expense detail allowed Abercrombie & Fitch Tuesday to report double-digit earnings increases for the fourth quarter and year, despite nearly three years of decreasing same-store sales.
For the three months ended Feb. 1, profits rallied 17.2 percent to $92.8 million, or 93 cents a diluted share, compared with income of $79.2 million, or 78 cents, in the same quarter last year.
Results blasted through earlier company forecasts, which were twice raised during the quarter. On Feb. 6, A&F said that, based on better-than-expected January sales, it expected to exceed its previously raised guidance for the quarter of 86 to 88 cents, which had been raised from 79 cents.
Tight inventory and expense controls and strong merchandise margins allowed A&F to focus on the bottom line "despite the short holiday season, sliding consumer confidence and the economy," Mike Jeffries, chairman and chief executive, said on an afternoon conference call.
Total sales during the quarter increased 14.6 percent to $534.5 million over sales of $466.6 million, but fell 4 percent on a comparable-store basis. Jeffries said women’s comps were positive for the quarter and its spring merchandise fashion is on track with a focus on bare, feminine and sexy looks, including a broad assortment of body-conscious tops and military-influenced pants, skirts and shorts.
Jeffries noted that the 597-unit company will focus on turn, bringing new apparel to the stores more frequently without increasing inventory levels.
The Hollister division is performing well, achieving double-digit comps, supported by 60 new stores in 2002 and a strong girls’ wear business, which now comprises 65 percent of the total business. The firm said that, in 2003, it plans to open 110 new stores — 30 A&F units, 10 Abercrombie kid’s stores and 70 Hollister nameplates — increasing total square footage by 17 percent.
The company said although it is pleased with its business in 2002, it is uncertain about the retail environment and reiterated First Call’s average analysts estimates of 25 cents a share for the first quarter and 34 cents for the second.
For the full year, income rose 15.6 percent to $194.9 million, or $1.94 a diluted share, versus 2001 earnings of $168.7 million, or $1.65. Sales rose 16.9 percent to $1.60 billion over sales of $1.37 billion in 2001, but slipped 5 percent on a comp basis."The future of our company never looked better," Jeffries said of the three brands.
Jeffries’ future looks all but assured, too.
In a Securities and Exchange Commission filing this month, A&F said it awarded Jeffries a new contract, saying it wanted to keep him there for the rest of his career and promising him monthly payments for life if he stays on the job through 2008. Jeffries has been ceo since 1992 and chairman since 1998. According to the contract, A&F would pay Jeffries $1 million in annual base salary, plus annual bonuses of up to 240 percent of the base salary if the company hits certain performance targets. The employment agreement also calls for Jeffries to receive a "career share award" of 1 million shares — worth nearly $29 million at current stock prices — which will vest on Dec. 31, 2008, provided he is still employed at A&F at that time.
A&F’s stock rose 84 cents, or 3.1 percent, to close at $27.82 a share in New York Stock Exchange trading Tuesday.
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