A&F(US:ANF)2019-11-26 20:07Financial Data and Key Metrics Changes - For Q3 2019, net sales were $863 million, approximately flat compared to last year, with a 1% increase on a constant currency basis, reflecting an $8 million adverse impact from foreign exchange (FX) [25] - Gross profit rate was 60.1%, down 120 basis points from last year, with FX adversely impacting results by 40 basis points [26] - Adjusted net income per diluted share was $0.23, compared to $0.33 last year, or $0.27 on a constant-currency basis [28] Business Line Data and Key Metrics Changes - Abercrombie brand achieved a 3% comp growth, while Hollister experienced a -2% comp, with Abercrombie showing improvement in conversion and average transaction value [6][10] - Gilly Hicks saw meaningful double-digit comp growth, indicating strong performance in intimates and lounge offerings [16] Market Data and Key Metrics Changes - US comp growth was 3%, down from 6% last year, while international comp was -8%, compared to -3% last year [6][25] - The UK market was negatively impacted by Brexit uncertainty, while protests in Europe and Asia also affected sales [8] Company Strategy and Development Direction - The company is making strategic investments to scale its business internationally, including hiring region-specific heads for Europe and Asia [9] - Focus on optimizing the global store network, with plans to reduce square footage by 30% to 50% in Abercrombie stores [18][53] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for the holiday selling season based on performance in October and early November [5] - Despite challenges such as FX rates, tariffs, and global protests, the company expects to finish 2019 strongly and is focused on key initiatives for growth in 2020 [24][30] Other Important Information - The company repurchased approximately 412,000 shares for roughly $6 million during the quarter, with a total of $103 million returned to shareholders year-to-date [29] - The company is implementing expanded payment options and loyalty programs to enhance customer engagement [23] Q&A Session Summary Question: Can you provide color on merchandise margin trends by concept in the US? - Management indicated that Hollister was more promotional than Abercrombie, with overall average unit retail (AUR) flat when excluding FX [34] Question: How should we think about the international business outlook? - Management noted improved trends heading into Q4, despite ongoing challenges from Brexit and protests [37] Question: What are the biggest improvement opportunities for 2020? - Focus areas include top-line growth, gross margin acceleration, and operating expense leverage [40] Question: Can you elaborate on the international comps of -8%? - Management explained that Brexit and protests in Europe impacted sales, particularly for Hollister, which has a larger presence in the UK [42] Question: What changes are being made to inventory management at Hollister? - Adjustments were made to focus more on key items and less on chase inventory, with positive initial selling trends observed in Q4 [46] Question: How are remodeled stores performing compared to older ones? - Hollister's remodeled stores have shown consistent high-single digit sales returns, while Abercrombie is still early in its remodeling journey [52]