Abercrombie & Fitch 2008 Annual Report Download - page 34

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Table of Contents
exclusion of previously recognized tax benefits related to the previous employee agreement, compared to
$2.40 for the Fiscal 2007 comparable period.
FISCAL 2008 RESULTS
Net Sales
Net sales for Fiscal 2008 were $3.540 billion, a decrease of 5.6% from Fiscal 2007 net sales of
$3.750 billion. The net sales decrease was attributed primarily to the 13% decrease in comparable store
sales, partially offset by a net addition of 90 stores and a 5.7% increase in direct-to-consumer business,
including shipping and handling revenue.
For Fiscal 2008, comparable store sales by brand were as follows: Abercrombie & Fitch decreased
8%; abercrombie decreased 19%; Hollister decreased 17%; and RUEHL decreased 23%.
Direct-to-consumer net merchandise sales in Fiscal 2008 were $271.0 million, an increase of 4.7%
over Fiscal 2007 net merchandise sales of $258.9 million. Shipping and handling revenue was
$44.0 million in Fiscal 2008 and $39.1 million in Fiscal 2007. The direct-to-consumer business, including
shipping and handling revenue, accounted for 8.9% of total net sales in Fiscal 2008 compared to 8.0% of
total net sales in Fiscal 2007.
Gross Profit
For Fiscal 2008, gross profit decreased to $2.362 billion from $2.511 billion in Fiscal 2007. The gross
profit rate for Fiscal 2008 was 66.7% versus 67.0% the previous year, a decrease of 30 basis points. The
decrease in the gross profit rate was driven primarily by an improved initial mark-up rate more than offset
by a higher markdown rate. In the fourth quarter of Fiscal 2008, the Company took higher markdowns to
clear through seasonal merchandise.
Stores and Distribution Expense
Stores and distribution expense for Fiscal 2008 was $1.512 billion compared to $1.387 billion for
Fiscal 2007. For Fiscal 2008, the stores and distribution expense rate was 42.7% compared to 37.0% for
Fiscal 2007. The increase in rate resulted primarily from the Company’s limited ability to leverage fixed
expenses due to the negative 13% comparable store sales. Additionally, Fiscal 2008’s stores and
distribution expense also included additional direct expenses related to flagship pre-opening rent
expenses, as well as minimum wage and manager salary increases and a $30.6 million non-cash
impairment charge associated with store-related assets.
Marketing, General and Administrative Expense
Marketing, general and administrative expense for Fiscal 2008 increased 6.0% to $419.7 million
compared to $395.8 million in Fiscal 2007. The increase in expense reflects investments in home office
resources necessary for flagship and international expansion, partially offset by savings in incentive
compensation and benefits and other home office expenses in the second half of Fiscal 2008. The
marketing, general and administrative expense rate was 11.9% for Fiscal 2008, an increase of
1.3 percentage points compared to 10.6% for Fiscal 2007.
31
Source: ABERCROMBIE & FITCH CO /DE/, 10-K, March 27, 2009 Powered by Morningstar® Document Research℠