Abercrombie & Fitch 2008 Annual Report Download - page 45

Table of Contents
the home office and the distribution centers, including home office expansion, information technology
investments and other projects.
In Fiscal 2007, total capital expenditures were $403.3 million, of which $252.8 million was used for
store related projects related to new construction and remodels, conversions and refreshes of existing
Abercrombie & Fitch, abercrombie and Hollister stores. The remaining $150.5 million was used for
projects at the home office and the distribution centers, including home office expansion, information
technology investments, the purchase of an airplane and other projects.
In Fiscal 2006, total capital expenditures were $403.5 million, of which $253.7 million was used for
store related projects related to new store construction and remodels, conversions and refreshes of existing
Abercrombie & Fitch, abercrombie and Hollister stores. The remaining $149.8 million was used for
projects at the home office, including the completion of the second DC, home office expansion,
information technology investments and other projects.
Lessor construction allowances are an integral part of the decision making process for assessing the
viability of new store locations. In making the decision whether to invest in a store location, the Company
calculates the estimated future return on its investment based on the cost of construction, less any
construction allowances to be received from the landlord. The Company received $55.4 million,
$43.4 million and $49.4 million in construction allowances during Fiscal 2008, Fiscal 2007 and Fiscal
2006, respectively. The construction allowances can fluctuate year-to-year based on the amount of store
construction completed during the year.
During Fiscal 2009, based on current lease commitments, the Company anticipates capital
expenditures between approximately $170 million and $180 million. Approximately $125 to $130 million
of this amount is allocated to new store construction, full store remodels and store refreshes, with
$75 million allocated to flagship construction. The Company is planning approximately $45 to
$50 million in capital expenditures at the home office related to information technology investments, new
direct-to-consumer distribution and logistics systems and other home office projects.
Based on current signed lease commitments, the Company plans to open 17 stores in Fiscal 2009,
including 11 domestic and six international stores. Domestically, the increase will be due to the addition
of two abercrombie mall-based stores, four Hollister mall-based stores and a Hollister flagship, one Ruehl
outlet store, two Gilly Hicks mall-based stores, and one Gilly Hicks outlet store. International growth will
result from the openings of two Abercrombie & Fitch flagships, one abercrombie flagship, one Canadian
abercrombie store and two Hollister mall-based stores.
The Company expects to sign additional lease commitments during the fiscal year that will increase
the store count and capital expenditures from the expectations discussed above.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company’s discussion and analysis of its financial condition and results of operations are based
upon the Company’s consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these consolidated
financial statements requires the Company to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses. Since actual results may differ from those estimates,
the Company revises its estimates and assumptions as new information becomes available.
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Source: ABERCROMBIE & FITCH CO /DE/, 10-K, March 27, 2009 Powered by Morningstar® Document Research℠