Abercrombie & Fitch’s Bottom Line Saw Double-Digit Growth in 4Q17
Adjusted EPS beat estimates
In fiscal 4Q17, Abercrombie & Fitch’s (ANF) adjusted EPS came in at $1.38, which was much better than the analysts’ estimate of $1.10 and up 84% from fiscal 4Q16. Increases in sales driven by the company’s strategic efforts as well as higher profits have resulted in a strong bottom-line performance. Adjusted non-GAAP net income attributable to the company came in at $97.2 million compared to $50.9 million reported in fiscal 4Q16.
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The company’s reported EPS (14-week) was $1.05 compared with $0.71 reported in fiscal 4Q16 (13-week). Favorable foreign exchange movement added $0.14 to the fiscal 4Q17 EPS. The bottom line was negatively impacted by $0.28 per share due to the recent tax reforms.
Store portfolio rationalization
To enhance the efficiency of its store base, the company is shutting down underperforming stores and downsizing and remodeling others. In fiscal 2017, the company closed 39 stores (mostly in the US) and opened nine new stores. As of February 3, 2018, the company operated 679 stores in the United States and another 189 stores in international markets. The company spent $107 million in capital expenditure in fiscal 2017.
The company also launched its first A&F prototype store. The company also launched an A&F store on Alibaba’s (BABA) Tmall platform.
For fiscal 2018, the company expects to open almost 60 stores (mostly in the US). Capex is estimated to be around $130 million with $45 million going toward the development of the digital/omnichannel sales platform and the remaining for store opening/remodeling.
How have the peers performed?
In 4Q17, Gap (GPS) reported adjusted EPS (excluding the tax charge) of $0.61, easily topping analysts’ expectations of $0.58 while increasing 19.6% on a YoY basis.
Urban Outfitters’ (URBN) adjusted EPS of $0.69 beat the analysts’ estimate of $0.63. A higher top line offset the increases in expenses.