Abercrombie & Fitch Co. (NYSE:ANF) Q4 2017 Earnings Conference Call Transcript

Mar 07, 2018 • 08:30 am ET

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Abercrombie & Fitch Co. (NYSE:ANF) Q4 2017 Earnings Conference Call Transcript

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Presentation
Executive
Fran Horowitz

start of the year and more. 2018 will be a year of building on new foundations and investing in the drivers of future long-term growth.

Turning to the quarter. We drove another strong performance at Hollister, with sales growth across all channels and geographies. We have previously said that Hollister started its revitalization journey earlier. It continues to build momentum and take market share.

At Abercrombie, we drove further improvements, building on the early signs of stabilization of the core U.S. business and conversion improvement we noticed last quarter and achieving a return to positive comp sales.

As I've said previously, we see DTC as our largest storefront, and we saw another strong DTC quarter. With an 18% increase in comp sales, DTC grew to 34% of total sales compared to 31% of total sales last year. Mobile engagement continues to grow, with more than 70% of our DTC traffic coming from mobile during the quarter. The investments we've made in this area are paying off with a 14% improvement in conversion.

We continue to build on our strength in omni-channel with ongoing international rollout of our capabilities. In concert with these investments, we have made further strides with our physical stores, driving improved productivity from our new prototype and remodeled stores. In fact, several of the new stores we opened across brands during 2017 are among the best performing in our fleet.

The focus of our efforts is on continual testing, learning and adapting to make sure we have the most effective integration of the physical and digital world. That's the foundation that's making sure our customers' engagement with our brand is the best it can be whenever, wherever and however they choose to shop with us.

Turning to some specific details on the brands. Hollister, our largest brand, continued to show strong growth. Our 11% sales comp was supported by strength across genders, categories and channels during the quarter and the best Black Friday in the brand's history. Overall, both guys and girls businesses accelerated, which resulted in record sales across genders in outerwear and jeans for the year. Fleece and graphic tees were also extremely strong across genders for the quarter. Our guys business continued to take market share, with its best annual sales in the brand's history.

On the girls side, we continue to see an enthusiastic response to Gilly Hicks, and our ongoing testing is helping us assess the scale of its full potential. We can attribute much of our success to closeness to the customer, both from our time in stores as well as the insights from our Club Cali loyalty program, which totaled more than 10 million members at year's end after just over 18 months and continues to grow. As we've said before, our club members shop with us more frequently and spend more per transaction than non-members.

Our loyalty program is proving to be a powerful platform for testing and learning and for engaging with some of our most valuable customers.