Abercrombie & Fitch 2014 Annual Report Download - page 28

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28
For Fiscal 2014, comparable sales by brand, including direct-to-consumer sales, decreased 4% for Abercrombie & Fitch, decreased
7% for abercrombie kids, and decreased 10% for Hollister.
Gross Profit
Gross profit was $2.314 billion for Fiscal 2014 compared to $2.575 billion for Fiscal 2013. The gross profit rate (gross profit
divided by net sales) for Fiscal 2014 was 61.8%, down 80 basis points from the Fiscal 2013 rate of 62.6%.
The decrease in the gross profit rate was primarily driven by increased promotional activity, including shipping promotions in the
direct-to-consumer business, partially offset by lower average unit cost.
Stores and Distribution Expense
Stores and distribution expense was $1.703 billion for Fiscal 2014 compared to $1.908 billion for Fiscal 2013. Stores and distribution
expense included $8.3 million of charges for Fiscal 2014 and $1.1 million of charges for Fiscal 2013 related to lease terminations,
store closures and the Company's profit improvement initiative. Excluding these charges, the stores and distribution expense rate
was 45.3% of net sales for Fiscal 2014, down 100 basis points from 46.3% of net sales for Fiscal 2013.
The decrease in stores and distribution expense as a percent of net sales was driven primarily by savings from the Company's
profit improvement initiative, largely in store payroll and other controllable store expense, partially offset by the deleveraging
effect of negative comparable sales and higher direct-to-consumer expense.
Shipping and handling costs, including costs incurred to store, move and prepare merchandise for shipment and costs incurred to
physically move merchandise to customers, associated with direct-to-consumer operations were $108.1 million for Fiscal 2014
compared to $93.4 million for Fiscal 2013. These amounts are included in Stores and Distribution Expense on the Consolidated
Statements of Operations and Comprehensive (Loss) Income.
Handling costs, including costs incurred to store, move and prepare merchandise for shipment to stores were $52.2 million for
Fiscal 2014 compared to $53.9 million for Fiscal 2013. These amounts are included in Stores and Distribution Expense on the
Consolidated Statements of Operations and Comprehensive (Loss) Income.
Marketing, General and Administrative Expense
Marketing, general and administrative expense was $458.8 million for Fiscal 2014 compared to $481.8 million for Fiscal 2013.
Marketing, general and administrative expense included $16.4 million of charges for Fiscal 2014 and $12.7 million of charges for
Fiscal 2013 related to the Company's profit improvement initiative. Excluding these charges, marketing, general and administrative
expense was $442.4 million for Fiscal 2014 compared to $469.1 million for Fiscal 2013, a decrease of $26.7 million.
The decrease in marketing, general and administrative expense was driven primarily by a decrease in compensation expense,
partially offset by an increase in marketing expenses.
Restructuring Charges
Charges associated with the restructuring of the Gilly Hicks brand were $8.4 million for Fiscal 2014, of which $6.0 million related
to lease terminations and $2.1 million related to asset impairment. Charges associated with the restructuring of the Gilly Hicks
brand were $81.5 million for Fiscal 2013, of which $42.7 million related to lease terminations and $37.9 million related to asset
impairment.
Asset Impairment
The Company incurred non-cash asset impairment charges of $45.0 million for Fiscal 2014 related to 51 stores whose asset carrying
values were determined to not be recoverable and exceeded fair value. Store-related asset impairment charges for Fiscal 2014
primarily related to the Company's Abercrombie & Fitch flagship store locations in Tokyo, Japan and Seoul, Korea, as well as
nine Hollister stores and nine abercrombie kids stores. Additionally, in connection with the Company's plan to sell the corporate
aircraft, the Company incurred charges of approximately $11.3 million to record the expected loss on the disposal of the asset.
For Fiscal 2013, the Company incurred non-cash asset impairment charges of $46.7 million primarily related to 97 stores whose
asset carrying values were determined to not be recoverable and exceeded fair value.