http://www.morningstar.com/earnings/45243423-abercrombie-fitch-co-class-a-anf-q3-2012.aspx

Abercrombie & Fitch Co Class A ANF
Q3 2012 Earnings Call Transcript

Transcript Call Date 11/14/2012

Operator: Good day, everyone. Welcome to the Abercrombie & Fitch Third Quarter 2012 Earnings Results Conference Call. Today's conference is being recorded. We will open the call to take your questions at the end of the presentation. We ask that you please limit yourself to one question during the question-and-answer session.

At this time, I would like to turn the conference over to Brian Logan. Mr. Logan, please go ahead.

Brian Logan - VP, IR: Good morning, and welcome to our third quarter earnings call. Earlier today, we released our third quarter sales and earnings, income statement, balance sheet, store opening and closing summary, and an updated financial history. Please feel free to reference these materials available on our website.

Also available on our website is an Investor Presentation which we will be referring to in our comments during this call. This call is being recorded and the replay may be accessed through the Internet at abercrombie.com under the Investors section.

Before we begin, I'll remind you that any forward-looking statements we may make today are subject to the Safe Harbor statements found in our SEC filings.

Today's earnings call is scheduled for one hour. Joining me today on the call are Mike Jeffries and Jonathan Ramsden. We will begin the call with a few remarks from Mike, followed by a review of the financial performance for the quarter from Jonathan and me. After our prepared comments, we will be available to take your questions for as long as time permits.

Now, to Mike.

Michael S. Jeffries - Chairman and CEO: Good morning, everyone. The third quarter results we are reporting today include total sales up 9% and diluted earnings per share up 53% versus a year ago. Our operating margin for the quarter increased to 9.6% from 7.4% a year ago. These significantly improved financial results reflect progress on several fronts over the past quarter.

Starting with sales, we saw a sequential trend improvement in same-store sales in both the U.S. and international businesses. U.S. same-store sales increased 2% with chain stores up 6% and flagship tourist stores down 12%.

Looking at our U.S. chain stores plus U.S. direct-to-consumer, comparable sales were up 7%, on top of growth of 16% in the comparable period last year. As reflected in the chart in our investor presentation, this means we now have had positive growth on this key metric for each of the past 11 quarters.

Our overall international business grew 37% for the quarter and we saw a sequential comparable-store sales improvement in all markets other than the U.K. where comps were similar to the second quarter. Elsewhere in Europe, bright spots included positive comps in Scandinavia and flat comps in Belgium and Spain. We are encouraged by our trend in Asia, where our first Hong Kong Hollister store has been comping positively since it lapped the initial opening period. In addition, we expect to comp positively in China, when the first three stores moved into the comp phase and we have opened well in our first store in South Korea. International direct-to-customer sales grew strongly, up 31% versus a year ago, with Europe particularly strong. New stores opened during the quarter have performed well.

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