A&F(US:ANF)2020-03-04 21:02Financial Data and Key Metrics Changes - Total net sales for Q4 2019 were $1.2 billion, a 3% increase from the previous year on both reported and constant currency basis [30] - Comp sales increased by 1% compared to a 3% increase last year [30] - Gross profit rate declined by 90 basis points to 58.2% due to higher average unit costs (AUC) and adverse impacts from foreign exchange (FX) and tariffs [31] - Net income per diluted share was $1.31, down from $1.35 last year, with FX impacting results by approximately $0.07 [33] Business Line Data and Key Metrics Changes - Abercrombie brand achieved a comp sales increase of 8%, while Hollister experienced a decline of 2% [30] - The U.S. market posted a 3% comp increase, marking the 10th consecutive quarter of positive comps, while international comps improved sequentially to -3% [12][31] - Digital sales grew in the double-digit range, exceeding $1 billion in annual revenue, although two-thirds of transactions still occurred in-store [20] Market Data and Key Metrics Changes - International comp sales improved sequentially, with Europe and Asia showing significant recovery pre-coronavirus [54] - The adverse impact of the coronavirus was estimated to affect approximately $60 million to $80 million in sales for the year [40] Company Strategy and Development Direction - The company is focused on transformation initiatives, including global store network optimization and enhancing omnichannel capabilities [20][26] - Plans to continue reducing gross square footage and closing underperforming flagship stores while investing in smaller, more productive spaces [21][24] - The company aims to double its adjusted non-GAAP operating margin to 5.8% over time, despite external challenges [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term growth drivers in Europe and Asia, despite short-term challenges posed by the coronavirus [10] - The company anticipates a flat to 2% increase in net sales for the year, factoring in the impact of the coronavirus [40] - Management emphasized the importance of controlling internal factors while navigating external uncertainties [29] Other Important Information - The company has made significant progress in its ESG efforts, including participation in the UN Global Compact [9] - The company plans to open approximately 40 new stores in 2020, maintaining a consistent pace of store openings [68] Q&A Session Summary Question: Competitive landscape in the U.S. market and impact of store closings - Management noted that while the competitive landscape remains challenging, store closures in the industry could provide opportunities for real estate expansion [44] Question: Changes in inventory and expense planning due to coronavirus - Management confirmed that inventory and expense planning processes remain unchanged, with a focus on weekly assessments [48] Question: Performance of Abercrombie and Hollister domestically and internationally - Management reported strong performance in both brands, with notable successes in outerwear and denim [52] Question: Outlook for gross margin and AUR/AUC expectations - Management expressed optimism for gross margin expansion, anticipating stable AUR and improvements in AUC [60] Question: Long-term operating margin goals and international business outlook - Management reiterated focus on top-line growth, gross margin expansion, and operating expense leverage as key drivers for long-term margin goals [73]