Abercrombie & Fitch 2008 Annual Report Download - page 35

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Table of Contents
Other Operating Income, Net
Other operating income for Fiscal 2008 was $8.9 million compared to $11.7 million for Fiscal 2007.
The decrease was primarily driven by losses on foreign currency transactions for Fiscal 2008 compared to
gains on foreign currency transactions for Fiscal 2007, as well as a decrease in income related to gift cards
for which the Company has determined the likelihood of redemption to be remote.
Operating Income
Fiscal 2008 operating income was $439.4 million compared to $740.5 million for Fiscal 2007. The
operating income rate for Fiscal 2008 was 12.4% compared to 19.7% for Fiscal 2007.
Interest Income, Net and Income Tax Expense
Fiscal 2008 interest income was $14.8 million, offset by interest expense of $3.4 million compared to
interest income of $19.8 million, offset by interest expense of $1.0 million for Fiscal 2007. The decrease
in interest income was primarily due to a lower average rate of return on investments. The increase in
interest expense in Fiscal 2008 was due to borrowings made under the unsecured credit agreement in
Fiscal 2008.
The effective tax rate for Fiscal 2008 was 39.6% compared to 37.4% for the Fiscal 2007 comparable
period. The higher rate was primarily due to the non-deductibility, pursuant to Internal Revenue Code
section 162(m), of certain compensation related to the execution of the CEO’s new employment
agreement during the year.
Net Income and Net Income per Share
Net income for Fiscal 2008 was $272.3 million compared to $475.7 million for Fiscal 2007. Net
income per diluted weighted-average share was $3.05 in Fiscal 2008 versus $5.20 in Fiscal 2007.
FISCAL 2007 COMPARED TO FISCAL 2006
FOURTH QUARTER RESULTS
Net Sales
Fourth quarter net sales for the thirteen week period ended February 2, 2008 were $1.229 billion, up
7.9% versus net sales of $1.139 billion for the fourteen week period ended February 3, 2007. The net sales
increase was attributed primarily to the net addition of 91 stores and a 46.8% increase in
direct-to-consumer business (including shipping and handling revenue), partially offset by an extra selling
week in the fourth quarter of Fiscal 2006 and the resulting impact of the calendar shift in Fiscal 2007 due
to Fiscal 2006 being a 53-week fiscal year, as well as a 1% decrease in comparable store sales.
Comparable store sales by brand for the fourth quarter of Fiscal 2007 were as follows:
Abercrombie & Fitch increased 1% with men’s comparable store sales increasing by a low double-digit
and women’s decreasing by a mid single-digit; abercrombie decreased 3% with boys’ increasing by a mid
single-digit and girls’ decreasing by a mid single-digit; Hollister decreased 2% with dudes’ increasing by
a high single-digit and bettys’ decreasing by a mid single-digit; and RUEHL decreased 19% with men’s
decreasing by a high single-digit and women’s decreasing by the high twenties.
Comparable regional store sales ranged from increases in the high teens to decreases in the mid
single-digits. Stores located in Canada and the Southwest and North Atlantic regions had the strongest
comparable
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Source: ABERCROMBIE & FITCH CO /DE/, 10-K, March 27, 2009 Powered by Morningstar® Document Research℠