Abercrombie & Fitch 2014 Annual Report Download - page 30

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As of January 31, 2015, there were approximately $15.9 million of net deferred tax assets in Japan. The realization of the net
deferred tax assets is dependent upon the future generation of sufficient taxable profits in Japan. While the Company believes it
is more likely than not that the net deferred tax assets will be realized, it is not certain. Should circumstances change, the net
deferred tax assets may become subject to a valuation allowance in the future. Additional valuation allowances would results in
additional tax expense.
Net Income and Net Income per Diluted Share
Net income was $51.8 million for Fiscal 2014 compared to net income of $54.6 million for Fiscal 2013. The Company reported
net income per diluted share of $0.71 and $0.69 for Fiscal 2014 and Fiscal 2013, respectively. Excluding certain charges, detailed
in the GAAP to non-GAAP financial measures reconciliation provided under "OVERVIEW," the Company reported adjusted non-
GAAP net income of $112.3 million and $150.6 million and adjusted non-GAAP net income per diluted share of $1.54 and $1.91
for Fiscal 2014 and Fiscal 2013, respectively.
FISCAL 2013 COMPARED TO FISCAL 2012
Net Sales
Net sales for Fiscal 2013 were $4.117 billion, a decrease of 9% from Fiscal 2012 net sales of $4.511 billion. The net sales decrease
was attributable to an 11% decrease in comparable sales, which equated to an 11% decrease in net sales, partially offset by growth
from opening new international stores.
U.S. Stores net sales for Fiscal 2013 were $2.161 billion, a decrease of 17% from Fiscal 2012 U.S. Stores net sales of $2.615
billion. The decrease in U.S. Stores net sales was primarily due to a 15% decrease in comparable U.S. Stores sales, which equated
into a 14% decrease in U.S. Stores net sales, and a 3% decrease in U.S. Stores sales attributable to net closure of 59 stores.
International Stores net sales for Fiscal 2013 were $1.179 billion, a decrease of 1% from Fiscal 2012 International Stores net sales
of $1.195 billion. The decrease in International Stores net sales was primarily due to a 19% decrease in comparable International
Stores sales, which equated into an 18% decrease in International Stores net sales, which was largely offset by a 17% increase in
International Stores net sales attributable to net opening of 24 stores.
Direct-to-Consumer net sales for Fiscal 2013, including shipping and handling revenue, were $776.9 million, an increase of 11%
from Fiscal 2012 Direct-to-Consumer net sales of $700.7 million. The increase in Direct-to-Consumer net sales was primarily due
to a 25% increase in comparable international Direct-to-Consumer net sales and a 7% increase in comparable U.S. Direct-to-
Consumer sales, which together equated into a 13% increase in Direct-to-Consumer sales. The Direct-to-Consumer business,
including shipping and handling revenue, accounted for 19% of total net sales in Fiscal 2013 compared to 16% in Fiscal 2012.
The impact of changes in foreign currency (based on converting prior year sales at current year exchange rates) benefited sales
by approximately $13.4 million in Fiscal 2013, which primarily related to the International Stores segment.
The Fiscal 2012 retail year included a fifty-third week and, therefore, Fiscal 2013 comparable sales are compared to the fifty-two
week period ended February 2, 2013. The net sales for the fifty-two week period ended February 2, 2013 were approximately
$63 million less than the net sales for the reported fifty-three week period ended February 2, 2013.
For Fiscal 2013, comparable sales by brand, including direct-to-consumer sales, decreased 10% for Abercrombie & Fitch, decreased
5% for abercrombie kids, and decreased 14% for Hollister.
Gross Profit
Gross profit was $2.575 billion for Fiscal 2013 compared to gross profit of $2.817 billion for Fiscal 2012. The gross profit rate
(gross profit divided by net sales) for Fiscal 2013 was 62.6%, up 20 basis points from the Fiscal 2012 rate of 62.4%.
Stores and Distribution Expense
Stores and distribution expense was $1.908 billion for Fiscal 2013 compared to $1.981 billion for Fiscal 2012. The stores and
distribution expense rate (stores and distribution expense divided by net sales) for Fiscal 2013 was 46.3% compared to 43.9% for
Fiscal 2012. Stores and distribution expense for the full year included $1.1 million of charges related to the profit improvement
initiative. Savings in store payroll, store management and support and other stores and distribution expenses, including savings