Abercrombie & Fitch 2005 Annual Report Download

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Table of contents

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    Abercrombie & Fitch

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    ... Income 26 Consolidated Balance Sheets 27 Consolidated Statements of Shareholders' Equity 28 Consolidated Statements of Cash Flows 29 Notes to Consolidated Financial Statements 30 Report of Independent Registered Public Accounting Firm 40 Corporate Information 43 Senior Management and Board of...

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    ... this concept performs, achieving net sales of approximately one billion dollars and $528 per square foot. For Fiscal 2005, net sales at Hollister increased 72% with comparable store sales increasing 29%. Our Abercrombie & Fitch brand achieved a comparable store sales increase of 18%, demonstrating...

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    ... our first Abercrombie & Fitch stores in Canada late in the year. The stores are off to an amazing start with productivity above that of our average Abercrombie & Fitch stores in the United States. In addition, we are planning to open flagship stores in the Grove at Farmer's Market in Los Angeles in...

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    ... Feet Average Number of Associates 851 6,025,000 69,100 788 5,590,000 48,500 700 5,016,000 30,200 597 4,358,000 22,000 491 3,673,000 16,700 * A store is included in comparable store sales when it has been open as the same brand at least one year and its square footage has not been expanded or...

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    ... versus $423.8 million in Fiscal 2004, resulting primarily from strong sales and income. During Fiscal 2005, the Company used cash from operations to finance its growth strategy, opening 57 new Hollister stores, 15 new Abercrombie & Fitch stores, five new abercrombie stores and four new RUEHL stores...

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    ... its design and technical design groups. During the fourth quarter of Fiscal 2005, the Company opened the first Abercrombie & Fitch flagship store on 5th Avenue in New York City. The store performed well throughout the fourth quarter of Fiscal 2005, exceeding management's initial sales productivity...

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    ... and personal care categories for the quarter, offset by decreases in woven shirts and sweaters. Direct-to-consumer merchandise net sales, which are sold through the Company's web sites and catalogue, in the fourth quarter of Fiscal 2005 were $47.5 million, an increase of 18.5% versus last year...

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    ... during Fiscal 2005. The Company believes that the increases in store management and loss prevention programs were key in driving sales and reducing shrink levels during the quarter, which had a favorable impact on the Company's gross profit rate. The distribution center productivity level, measured...

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    ... due to the implementation of brand protection initiatives throughout the year that reduced the amount of sale merchandise available on the web sites and limited the customer's ability to purchase large quantities of the same item. GROSS PROFIT For Fiscal 2005, gross profit increased to $1.851 bil...

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    ... retail pricing in Abercrombie & Fitch, abercrombie and Hollister. The three brands had IMU improvements compared to the fourth quarter of Fiscal 2003 and operated at similar margins. The Company ended the fourth quarter of Fiscal 2004 with inventories, at cost, up 11% per gross square foot versus...

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    ..., while Abercrombie & Fitch women had a low-single digit decrease. Direct-to-consumer merchandise net sales through the Company's web sites and catalogue for Fiscal 2004 were $110.6 million, an increase of 37.6% versus net sales of $80.4 million in Fiscal 2003. The Company added a Hollister direct...

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    ... Fiscal 2005 versus Fiscal 2004 was the result of higher cash and marketable securities resulting primarily from the Company's net sales increase and the increase in inventory, partially offset by an increase in income taxes payable. The decrease in working capital in Fiscal 2004 versus Fiscal 2003...

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    ... inventory levels in key product categories to ensure size, color and style integrity. The decrease in accounts payable and accrued expenses was due to payment of a legal settlement in Fiscal 2005 that was settled and accrued for in Fiscal 2004. The increase in cash provided by operating activities...

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    ... Square Feet (thousands) February 1, 2004 New Closed January 29, 2005 Average Store Size Abercrombie & Fitch 357 16 (16) 357 Abercrombie & Fitch 3,152 105 (119) 3,138 8,790 abercrombie 171 9 (9) 171 abercrombie 753 37 (38) 752 4,398 Hollister 172 84 - 256 Hollister 1,111 552 - 1,663 6,496 RUEHL...

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    ...70 new Hollister stores, 15 to 20 abercrombie stores, five to ten Abercrombie & Fitch stores and five to eight RUEHL stores. Additionally, the Company plans to remodel five to 15 Abercrombie & Fitch stores, including the opening of the flagship store in the Grove at Farmer's Market in Los Angeles in...

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    ... to customers in a sale transaction are classified as revenue and the related direct shipping costs are classified as stores and distribution expense. Employee discounts are classified as a reduction of revenue. The Company reserves for sales returns through estimates based on historical experience...

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    ... the stock option. The Company calculates the historic volatility as the annualized standard deviation of the differences in the natural logarithms of the weekly stock closing price, adjusted for dividends and stock splits. The fair market value calculation under the Black-Scholes valuation model is...

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    ... prices. Taking these provisions into account none of these investments extend beyond five years. The Company believes that a significant increase in interest rates could result in a material loss if the Company sells the investment prior to the early redemption provision. For Fiscal 2005...

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    ... amounts) Net Sales Cost of Goods Sold Gross Profit Stores and Distribution Expense Marketing, General & Administrative Expense Other Operating Income, Net Operating Income Interest Income, Net Income Before Income Taxes Provision for Income Taxes Net Income Net Income Per Share: 2005 $2,784...

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    Abercrombie & Fitch CONSOLIDATED BALANCE SHEETS (Thousands) Assets Current Assets January 28, 2006 January 29, 2005 Cash and Equivalents Marketable Securities Receivables Inventories Deferred Income Taxes Other Current Assets Total Current Assets Property and Equipment, Net Other Assets Total ...

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    ...-In Capital Retained Earnings Deferred Compensation Treasury Stock At Average Cost Total Shareholders' Equity (Thousands) Balance, February 1, 2003 Shares Purchase of Treasury Stock Net Income Restricted Stock Unit Issuance Restricted Stock Unit Expense Stock Option Exercises Tax Benefit from...

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    ...: Inventories Accounts Payable and Accrued Expenses Income Taxes Tax Benefit of Stock Option Exercises Other Assets and Liabilities Net Cash Provided by Operating Activities Investing Activities: Capital Expenditures Marketable Securities Activity: Purchases Proceeds from Sales Net Marketable...

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    ... Enterprise and Related Information," the Company determined its operating segments on the same basis that it uses internally to evaluate performance. The operating segments identified by the Company, Abercrombie & Fitch, abercrombie, Hollister and RUEHL, have been aggregated and are reported as one...

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    ..., 2005, respectively. STORE SUPPLIES The initial inventory of supplies for new stores including, but not limited to, security tags, hangers and miscellaneous supplies are capitalized at the store opening date. In lieu of amortizing the initial balances over their estimated useful lives, the Company...

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    ... for adjustments to the gift card liability was recognized during Fiscal 2003. The Company does not include tax amounts collected as part of the sales transaction in its net sales results. REVENUE RECOGNITION COST OF GOODS SOLD Cost of goods sold includes cost of merchandise, markdowns, inventory...

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    ..., the following weighted-average assumptions were used: Dividend yield Price volatility Risk-free interest rate Annual forfeiture rate Expected life (years) 2005 1.1% 47% 4.0% 5.7% 4 2004 1.3% 56% 3.2% 6.4% 4 2003 - 63% 3.0% 5.3% 4 In December 2004, the Financial Accounting Standards Board ("FASB...

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    ... of three related class action employment discrimination lawsuits. 8. INCOME TAXES The provision for income taxes consisted of 5. DEFERRED LEASE CREDITS, NET Deferred lease credits are derived from payments received from landlords to partially offset store construction costs and are reclassified...

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    ...10,941) Under the Company's stock plans, associates and non-associate directors may be granted up to a total of 25.9 million restricted shares and options to purchase A&F's common stock at the market price on the date of grant. In Fiscal 2005, associates of the Company were granted options covering...

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    ... service and compensation requirements. The Company's contributions to these plans are based on a percentage of associates' eligible annual compensation. The cost of these plans was $10.5 million in Fiscal 2005, $9.9 million in Fiscal 2004 and $7.0 million in Fiscal 2003. Effective February 2, 2003...

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    ... Situated and on Behalf of the Public v. Abercrombie & Fitch Stores, Inc., which was filed on July 10, 2002 in the California Superior Court for Los Angeles County, the plaintiffs alleged that California general and store managers were entitled to receive overtime pay as "non-exempt" employees...

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    ...Common Stock. The SEC has requested information from A&F and certain of its current and former officers and directors. The Company and its personnel are cooperating fully with the SEC. On December 9, 2005, a purported class action, styled Rankin, et al. v. Abercrombie & Fitch Stores, Inc., was filed...

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    ...Directors review of the Company's cash position and results of operations. As of April 1, 2006, there were approximately 5,340 shareholders of record. However, when including investors holding shares in broker accounts under street name, active associates who participate in A&F's stock purchase plan...

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    ...the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan...

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    Abercrombie & Fitch REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM is to express opinions on management's assessment and on the effectiveness of the Company's internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting ...

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    ... for 10:00 A.M., Wednesday, June 14, 2006 at Abercrombie & Fitch Headquarters, 6301 Fitch Path, New Albany, Ohio 43054. STOCK EXCHANGE LISTING PricewaterhouseCoopers LLP Columbus, Ohio INVESTOR RELATIONS New York Stock Exchange (Trading Symbol "ANF"), commonly listed in newspapers as AberFit...

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    ... General Manager of Hollister MICHAEL W. KRAMER * Senior Vice President and Chief Financial Officer REBECCA F. LEE Senior Vice President - Allocation DAVID L. LEINO Senior Vice President - Stores Human Resources THOMAS D. MENDENHALL * Senior Vice President and General Manager of Abercrombie & Fitch...

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