Abercrombie & Fitch Co. (NYSE:ANF) Q1 2018 Earnings Conference Call - Final Transcript

Jun 01, 2018 • 08:30 am ET

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Abercrombie & Fitch Co. (NYSE:ANF) Q1 2018 Earnings Conference Call - Final Transcript

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Presentation
Executive
Fran Horowitz

and continued traffic challenges in our flagship location.

Abercrombie also continues to focus on must win and must grow category, which accounted for more than two-thirds of sales, with a balanced performance across genders. Abercrombie's must win includes categories such as outerwear, fleece, jeans and pants, and must grow are those categories with the potential for significant growth, such as t-shirts, swim and dresses. Across genders we saw strong performance in knit, tees, and graphics and substantial growth in swim. We drove growth in women's bottom, particularly denim, and in men's outerwear. Overall, customers responded strongly to newness across color, pattern and detail, and we were able to chase at scale for the second quarter.

Kids also had a strong quarter across genders and categories with improved traffic and conversion. The Everybody Collection continues to perform strongly and respond to customer feedback and demand. We have plans to further build on this success.

At our Investor Day, we explained that in 2018, we entered a transforming while growing phase. Joanne can provide further detail on current areas of focus, and how we are leveraging our test and learn culture across the enterprise. We continue to operate with balance sheet discipline, providing us a strong base to fund our transformation and the flexibility to accelerate investments, when it makes sense to do so.

Overall, I'm pleased with another strong quarter and progress toward our goal of develop -- delivering top and bottom line improvement in 2018, while we work to transform our business to enable long-term growth and value creation.

And with that, I will hand it over to Joanne.

Executive
Joanne Crevoiserat

Thanks, Fran. Good morning, everyone. This morning, I will add a bit of color to the work underway on our transformation efforts. We are taking a holistic approach across the enterprise to transform our business model to support our longer term ambitions in a rapidly changing retail environment. As we covered in our Investor Day, we have supported these efforts with the creation of a transformation management office and supplemented our internal teams with external consultants to accelerate our transformation.

Our focus at this early stage has been on identifying and prioritizing the areas with greatest potential upsides from both the customer experience and an economic benefit perspective. As a result, we are now running multiple pilots across all work streams to inform our investments in people, processes and systems.

We have organised our efforts around four key areas. The first area of focus is our real estate portfolio, and the continuing optimization of our store network. We've made progress over a number of years in this area, but we continue to see opportunity. We have the least flexibility to make this happen, and the tools at our disposal to drive fixed costs down and improve productivity through store closures and rightsizing and expanding our prototype footprint through remodels and new store openings. These actions drive meaningful improvement in real estate productivity and customer engagement.

In the first quarter, total square