Abercrombie & Fitch Co. F4Q09 (Qtr End 01/30/10) Earnings Call Transcript

Abercrombie and Fitch Co. (ANF)

F4Q09 Earnings Call

February 16, 2010 8:30 am ET

Executives

Eric Cerny – Manager of Investor Relations

Jonathan Ramsden - Chief Financial Officer

Mike Jeffries – Chairman and Chief Executive Officer

Brian Logan – Principal Accounting Officer

Analysts

Barbara Wycoff – Jesup & Lamont

Jeff Klinefelter - Piper Jaffray

Christine Chen - Needham & Company

Jeff Black – Barclays Capital

Michele Tan – Goldman Sachs

Liz Dunn - Thomas Weisel

Taposh Bari – Jefferies

Paul Lejeuz - Credit Suisse

Janet Kloppenburg - JJK Research

Robert Samuels – Oppenheimer

Dorothy Lakner – Caris & Company

Roxanne Meyer – UBS

Adrienne Tennant - Friedman, Billings, Ramsey

Stacy Peck - SP Research

Lorraine Hutchison – Bank of America-Merrill Lynch

Howard Tubin – RBC

Edward Yruma – Key Banc

Dana Telsey - Telsey Advisory Group

Jennifer Black - Jennifer Black & Associates

Laura Champine – Cowen and Company

Presentation

Operator

(Operator Instructions) Welcome to this Abercrombie & Fitch Fourth Quarter Earnings Results Conference Call. At this time I would like to turn the conference over to Mr. Eric Cerny.

Eric Cerny

Welcome to our Fourth Quarter Earnings Call. Earlier this morning we released our fourth quarter sales and earnings, balance sheet, income statement and an updated financial history. Please feel free to reference these materials available on our website. This call is being recorded and the replay may be accessed through the internet at abercrombie4sale.com under the investor relations section.

Before we begin I remind you that any forward looking statements we may make today are subject to the safe harbor statement found in our SEC filings. Today’s earnings call will be limited to one hour. We will begin the call with a few brief remarks from Mike, followed by a review of the financial performance for the quarter from Jonathan Ramsden and Brian Logan. After our prepared comments we will be available to take your questions for as long as time permits. Please limit yourself to one question so that we can speak with any many callers as possible.

As stated in our earnings release today, our fourth quarter and annual results for the current and prior periods now reflect the reclassification of RUEHL into discontinued operations. The guidance we gave on our third quarter earnings call was prior to reflecting discontinued operations accounting for RUEHL and where significant we have indicated the affects of this in our commentary on the quarter.

We’ve been through a difficult year but we firmly believe it was a year in which we laid the foundations for future success. As we look back to a year ago, when we spoke to you regarding our objectives for 2009, we laid out what we were committed to protecting the brands, improving our product assortment, and not sacrificing quality. We said we would preserve cash, seek expense saving opportunities and efficiencies in the business, and continue to invest in our international expansion. All of which we believe we have done in a very difficult environment.

We continue to be very encouraged by our international roll out and Jonathan will provide more color on our 2010 plans in a moment. Today I feel more positive about our domestic business than I have for a long time. Why? First, because I feel good about our male business and I think we are on the right track with the female business. Our male business has a clear identity, is performing well, and has outpaced the women’s business over the last few years.

The female business is making progress; we are moving in the right direction for spring and will continue into summer and back to school. I encourage you to go to the stores and look at the assortment. You will see a healthy balance of basic and fashion product, exciting and improved fashion styles, along with increased variety. Personally I’m more involved in the women’s product and I am approaching this challenge with renewed energy and enthusiasm for improving this side of the business.

In addition, while we have never and do not ever plan to be a promotionally led business, we are getting better at figuring out something that was completely alien to us 18 months ago. We believe that AURs will need to continue to go lower in the spring but we also know that how we deliver that lower AUR is very important, both in terms of its effectiveness and in terms of protecting the brands. This must be done without sacrificing quality.

We have some exciting social media and marketing initiatives in the pipeline that I believe will help our business. We are actively seeking new ways to effectively engage our customers through these medium. Having recently launched on Facebook, abercrombieandfitch has already 775,000 fans, Hollister over 340,000. We recently released an iPhone application and continue to invest in our mobile commerce platform. For the future, we are investing in some new initiatives that we believe will provide a significant boost for our direct to consumer business and beyond.