Abercrombie & Fitch 2007 Annual Report Download - page 5

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CHAIRMAN’S LETTER
Once again, I am proud to report that our company achieved record sales and earnings, marking 16
consecutive years of sales and earnings improvement. Our success is a reflection of effective brand positioning
and our commitment to maintain and enhance that positioning over the long-term.
In 1992, we began to build a new Abercrombie & Fitch rooted in East Coast traditions with an Ivy League
heritage. We positioned the brand to target a young and hip customer by offering high quality, trend right
casual sportswear and creating a unique and exceptional in-store environment, which established an emotional
connection with our customer. We developed standards for every aspect of the customer experience to ensure
that the brand’s image was reinforced through product design and presentation, marketing imagery, music
and lighting, fragrance and enthusiastic and energetic brand representatives. We also recognized the importance
of protecting the long-term position of the brand by reinvesting in store refreshes and remodels, maintaining
full priced selling and avoiding market saturation. These standards continue to be the foundation of the
brand and today, I believe Abercrombie & Fitch is better positioned than ever before.
Leveraging the branding success of Abercrombie & Fitch, which has achieved iconic status with worldwide
recognition, we applied our strategy to our other internally developed brands which include: abercrombie, Hollister,
Ruehl and Gilly Hicks. While each brand possesses its own unique heritage and handwriting, they all share
common elements and characteristics including casual, classic, confidence, intelligence, privilege and a sense of
humor. Our objective is to be the dominate, aspirational lifestyle brand for each brand’s targeted age group.
The success of our brand is demonstrated by our long-standing financial performance. In 1992, we operated
40 Abercrombie & Fitch stores in the United States that generated $85.3 million in sales. Today, across all
brands, we operate over 1,000 stores in the United States, Canada and the United Kingdom. In 2007, we
generated $3.750 billion in sales and $475.7 million in net income, with earnings per diluted share of $5.20,
representing a 13% increase over 2006. Since becoming a publicly held company in 1996, sales and earnings
per diluted share have increased by a compounded annual growth rate of 25% and 31%, respectively, far
exceeding industry averages.
We believe we can continue to produce consistent and sustainable growth with our existing domestic and
international expansion opportunities. Domestically, growth will come from proven brands like Hollister
and developing concepts like Gilly Hicks. Internationally, growth will come from the Abercrombie & Fitch,
abercrombie and Hollister brands.
Our recent performance highlights the opportunity for international expansion. In 2007, the Abercrombie
& Fitch and Hollister stores located in Canada continued to generate more than three times the sales productivity
of the average U.S. counterpart and our Abercrombie & Fitch London flagship generated similar sales per
selling square foot to our amazingly productive Fifth Avenue flagship. “Tourist” stores, such as Fifth Avenue
in New York and Aventura Mall in Miami, are among the top performing stores in the chain. Additionally,
international direct-to-consumer sales increased 72.4% in 2007.
In 2008, we will continue our expansion into Canada with the opening of Abercrombie & Fitch, abercrombie
and Hollister stores. Hollister will make its debut in the U.K. market in 2008 with the opening of our first store
at Brent Cross Shopping Centre, outside of London. Construction is also underway for an Abercrombie & Fitch
flagship in Tokyo’s Ginza district, with a planned opening in late 2009. Additional opportunities are also being
pursued for the Abercrombie & Fitch and Hollister brands in continental Europe and other sites in Japan.
Domestically, we are on schedule to open our first Hollister flagship in New York’s SoHo area in early
2009 and we plan to open an abercrombie flagship in New York as well. We anticipate that the Hollister and
abercrombie flagships will further fortify the iconic status of these brands. In January 2008, we launched our
fifth concept, Gilly Hicks. Gilly Hicks gives us the opportunity to expand the existing emotional connection
we share with our female customers by offering them bras, underwear, personal care products, sleepwear and
at-home products. We recognize the learning curve associated with the specializations required to operate
this type of business and are committed to establishing the brand as the best in the intimates business as we have
done with our sportswear collections. We are very excited about the prospect of this compelling new brand.
The future of our company is very bright. Our brands are strong and relevant and our business is well
positioned for consistent and sustainable growth. I am confident that we will continue to be the premier
brand for each of our target age groups and I look forward to many more years of continued success.
Michael S. Jeffries
Chairman and Chief Executive Officer