Abercrombie & Fitch 2015 Annual Report Download - page 24

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Table of Contents
24
CURRENT TRENDS AND OUTLOOK
2015 was a year of tremendous change for Abercrombie & Fitch. We completed our transition to a brand-based organizational
structure, strengthened our teams and improved our core processes. More importantly, we evolved our assortment and refocused
our attention on our customer through greater accountability and empowerment at the store level, and through changes in our in-
store experience. In addition, we continued to invest in direct-to-consumer and omnichannel and execute our store closure program.
While we made progress across all of our strategic initiatives, our work to fulfill the potential of our brands is not done.
Our ongoing efforts to improve our business are focused on:
• Putting the customer at the center of everything we do.
• Delivering compelling and differentiated assortments.
• Optimizing our brand reach and channel performance.
• Defining clear positionings for our brands.
• Continuing to improve efficiency and reduce expense.
• Ensuring we are organized to succeed.
As we look ahead to Fiscal 2016, it is likely to remain a challenging retail environment, but we believe our ongoing efforts are
laying the foundation for future growth and profitability.
For Fiscal 2016, we expect:
• Flat to slightly positive comparable sales.
• Adverse effects from foreign currency exchange rates on sales.
• A gross margin rate approximately flat to Fiscal 2015's adjusted non-GAAP rate of 61.9%, but up on a constant currency
basis.
• Slight leverage in operating expense relative to last year's adjusted non-GAAP rate of 58.3%.
• An improvement over Fiscal 2015's adjusted non-GAAP operating income, despite an adverse effect from foreign currency
exchange rates; the effect from foreign currency exchange rates, calculated on a constant currency basis, is determined
by applying Fiscal 2016 forecasted rates to Fiscal 2015 results and is net of the year-over-year impact from hedging.
• An effective tax rate in the mid-to-upper 30s.
• A weighted average diluted share count of approximately 68 million shares, excluding the effect of potential share
buybacks.
With regard to capital allocation, we are targeting capital expenditures in the range of $150 million to $175 million for Fiscal
2016, including approximately $70 million for new stores and store updates and approximately $70 million for direct-to-
consumer/omnichannel and IT investments to support growth and continuous profit improvement
We plan to open approximately 15 full-price stores in Fiscal 2016, including approximately 10 in international markets,
primarily China, and approximately five in the U.S. We also plan to open approximately 10 new outlet stores, primarily in the
U.S. In addition, we anticipate closing approximately 60 stores in the U.S. during Fiscal 2016 through natural lease expirations.
Excluded from our Fiscal 2016 outlook are the impacts of potential events, such as those related to impairments, which may
affect our results of operations.