Abercrombie & Fitch Co. (NYSE:ANF) Q1 2018 Earnings Conference Call - Final Transcript
Jun 01, 2018 • 08:30 am ET
Thank you, sir. (Operator Instructions) We'll take our first question from Lorraine Hutchinson with Bank of America.
Thank you, good morning. I wanted to ask about the European business. I know you're doing some transformation of your real estate and store base. But I was wondering, if you could comment on pricing and the price differentials between Europe and US? Do you feel that pricing in Europe is appropriate or are there any actions that you need to take there to spur demand?
Hi, Lorraine. This is Joanne. We have -- we spend a lot of time looking at our pricing, particularly our ticket price structure. We do that on a regular basis. And we look at our ticket prices as it relates to what the customer sees and relative competition in the region. And as we've done that, as I mentioned, we do that regularly every season, as we said every floor set. But back in 2015, we did an analysis, and a lot of customer insight and research work that told us that our pricing was a little out of line. We did some testing at that time to lower pricing across both brands. It was more prominent in the Hollister brand at the time. We did some testing on that and we saw the returns, both in unit velocity and gross margin dollar accretion, and we did make investments in price. I would say, this is back about -- back-to-school time in 2015. And we have continued to monitor our ticket pricing structure to make sure that we are in line, and we feel good about where those ticket prices are now.
Next we'll go to Douglas Drummond with Wolfe Research.
Good morning. Thank you for taking our questions. Joanne, how many international flagships have you identified for potential lease kick outs in 2018? And in that vein of real estate optimization, as you shift to your store roll-out since new prototypes, and we get into the final ending of that strategic move, how much do you expect to see productivity rise in terms of sales per square foot from where it is today? Thank you very much.
Yes, we've been very encouraged by the changes we've made in our real estate optimization efforts across the board, and we are driving productivity improvements, which is nice to see. But we have a lot of room to go there. Specifically with the flagships, we have no new kick outs to announce. We did exercise that kick out in Copenhagen. And we continue to work on improving the performance of those stores and negotiating with our landlords. Our long-term strategy is to move away from the large format flagship stores that are underperforming in some locations, and in other locations just to complement those stores with mall-based stores in the regions to cultivate a more local customer base, and not be as dependent on the tourist customer. We did that in Hong Kong, as an example, and have