Abercrombie & Fitch 2008 Annual Report Download - page 7

Table of Contents
Merchandise Suppliers.
During Fiscal 2008, the Company purchased merchandise from approximately 210 vendors located
throughout the world; primarily in Asia and Central and South America. In Fiscal 2008, the Company
sourced approximately 6% of its apparel and personal care products from one single factory. Besides that
one factory, the Company did not source more than 5% of its apparel and personal care products from any
other single factory or supplier. The Company pursues a global sourcing strategy that includes
relationships with vendors in 37 countries and the United States (the “U.S.”). Any event causing a sudden
disruption, either political or financial, in these sourcing locations could have a material adverse effect on
the Company’s operations. The Company’s foreign purchases of merchandise are negotiated and settled in
U.S. dollars.
All product sources, including independent manufacturers and suppliers, must achieve and maintain
the Company’s high quality standards, which are an integral part of the Company’s identity. The
Company has established supplier product quality standards to ensure the high quality of fabrics and other
materials used in the Company’s products. The Company utilizes both home office and field employees to
help monitor compliance with the Company’s product quality standards.
Distribution and Merchandise Inventory.
A majority of the Company’s merchandise and related materials are shipped to the Company’s two
distribution centers (“DCs”) in New Albany, Ohio where they are received and inspected. Merchandise
and related materials are then distributed to the Company’s stores and direct-to-consumer customers
primarily using one contract carrier. Any event causing a sudden disruption in the operations of the DCs
or in carrier operations could have a material adverse effect on the Company’s operations.
The Company’s practice is to maintain sufficient quantities of inventory on hand in its retail stores
and DCs to offer customers a full selection of current merchandise. The Company attempts to balance
in-stock levels and inventory turnover, and to take markdowns when required to keep merchandise fresh
and current with fashion trends.
Information Systems.
The Company’s management information systems consist of a full range of retail, financial and
merchandising systems. The systems include applications related to point-of-sale, inventory management,
supply chain, planning, sourcing, merchandising and financial reporting. The Company continues to
invest in technology to upgrade core systems to make the Company scalable, efficient and more accurate
in the production and delivery of merchandise to stores. In addition, the Company invests in best practice
technologies that are expected to provide a clear competitive advantage.
Seasonal Business.
The retail apparel market has two principal selling seasons, the Spring season which includes the first
and second fiscal quarters (“Spring”) and the Fall season which includes the third and fourth fiscal
quarters (“Fall”). As is typical in the apparel industry, the Company experiences its greatest sales activity
during the Fall season due to the Back-to-School (August) and Holiday (November and December) selling
seasons.
During Spring of Fiscal 2008, the highest level of inventory, approximately $470.7 million at cost,
was reached at the end of July 2008, due to the upcoming Back-to-School selling season. The lowest level
of inventory, approximately $326.7 million at cost, was reached at the end of March 2008. During Fall of
Fiscal
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Source: ABERCROMBIE & FITCH CO /DE/, 10-K, March 27, 2009 Powered by Morningstar® Document Research℠