rct-abercrombie & fitch

Annual Report
Abercrombie & Fitch
Catherine Rios
ACG2021- 001

Executive Summary
Abercrombie & Fitch FISCAL 2008 ended in
January 31 2009 it showed a decrease in net sales
showing it is being affected by the current countries
crisis. During this year the Company used cash from
operation to finance its growth strategy. The steep
decline in consumer spending is affecting the
company and has reacted by having seasonal ending
clearance sales and are scaling back on domestic
expansion. This allowed the company to end
FISCAL 2008 with a strong cash position.
Abercrombie & Fitch Annual Report

Part A. Introduction
• Mike Jeffries CEO.
• home office:
6301 Fitch Path
New Albany, Ohio 43054
United States.
• Fiscal year ended January 31,
2009 (Fiscal 2008).
• Abercrombie & Fitch is a
specialty retailer that sells casual
sportswear apparel. In addition it
offers bras, underwear, personal
care products, sleepwear and at
home products for women.
• Company operates 1.125 in the
United States, Canada and the
United Kingdom.

Part A. Audit Report
• Independent Auditor:
Pricewaterhouse
Coopers LLC.
• According to
Pricewaterhouse
Coopers, the company
maintained effective
internal control over
financial reporting for
Fiscal 2008.

Part A. Stock Market
Information
• Most recent price of stock: $36.42
• Twelve month trading range of the
company’s stock has been:
• High: $82.06
• Low: $13.66
• Dividend per share: $0.175
• February 16, 2010
• In my opinion this company is being affected
by the recent economic situation customers
are more interested in lower priced clothing
stores. The price of stock has decreased
compared to Fiscal 2007 and the company
does not seem to be in a stable condition. I
would not recommend to buy stock in this
company since it seems its financial position
will only worsen with the current economy.
Abercrombie & Fitch

Part B. Industry Situation and
Company Plans
• Abercrombie & Fitch is a leading fashion specialty retailer
store that sell clothing and accessories under the Abercrombie
& Fitch, abercrombie, RUEHL, Gilly Hicks and Hollister. The
company views the customer in store experience as the primary
way of communicating the spirit of each brand. The retailer has
two principal selling seasons which are spring and fall. The
current financial situation has had a huge impact on the
company business. The company plans on continue expanding
but focusing more on expansion overseas.

Part C. Income
Statement
•Abercrombie & Fitch uses a
Multistep Income Statement, going
through a series of steps, or subtotals,
to arrive at their net income.
A&F
(in thousands)
2008 2007
Gross Profit $2,361,692 $2,511,367
Operating
Income
$439,386 $740,497
Net Income $272,255 $475,697
The company Gross
Profit decreased 30 basis
points this was due to the
current financial crisis
and the companies need
to clear merchandize as a
result of the declining
sales. The operating
income decrease was due
to foreign currency
transactions and the
decrease in income due to
gift cards.

Part C. Balance Sheet
A&F Assets = Liabilities + Stock Holders
(in thousands) Equity
2008 $2,848,181 $1,002,603 $1,845,578
2007 $2,567,598 $949,285 $1,618,313
• Abercrombie & Fitch showed an increase in
all three accounts. Its assets increased with the
openings of new stores abroad as well as its
Liabilities increased with it.

Part C. Statement of
Cash Flows
•Abercrombie & Fitch cash flows
from operations in the last two years
were significantly larger than net
income.
•The companies growth is due to
investing in capital expenditures
primarily to new store constructions,
store remodels and refreshnes, and
purchases of marketable securities.
•In FISCAL 2008 finances consisted
primarily of repurchase of
Companies Common Stock and the
payment of dividends.
•Overall cash has increased in the last
two years.

Part D. Accounting Policies
•Revenue recognition: The Company recognizes retail sales at
the time the customer takes possession of the merchandize .
Direct to customer sales are recorded upon customer receipt
of merchandize.
•Inventories: principally valued at the lower than average cost
or market utilizing the retail method.
•Property and equipment: are computed on a straight line
basis, using service lives.
•Income taxes: are calculated in accordance with SFAS No.
109 “Accounting for income taxes” which requires the use of
asset and liability method.
Abercrombie & Fitch

• Notes to the financial
statements:
1. Basis of presentation
2. Summary of significant
accounting policies
3. Recently issued accounting
pronouncements
4. Share based compensation
5. Cash and equivilents and
investments
6. Fair value
7. Property and equipment
8. Deferred lease credits, Net
9. Leased facilities and
commitments
10. Accrued expenses
11. Other liabilities
12. Income taxes
13. Debt
14. Derivatives
15. Retirement benefits
16. Contingencies
17. Prefered stoch purchase rights
18. Quaterly financial data
19. Subsequent event

Part E. Financial Analysis
Liquidity Ratios
A&F 2008 2007
Working Capital $636,028 $597,142
Current Ratio 2.41 2.10
Receivable turnover 66.22 70.14
Average days’ sales
uncollected
5.51 5.20
Inventory turnover 22.04 23.16
Average days’
inventory on hand
16.56 15.75
•The working capital and the current ratio both increased this
shows A&F liquidity and ability to pay off debts.
The decreases in the inventory turnover and increases in the
average days of inventory on hand show A&F inefficient use of
inventory.

Part E. Financial Analysis
Profitability Ratios
A&F 2008 2007
Profit margin 0.07 0.12
Asset turnover 1.30 1.38
Return on assets 0.10 0.17
Return of equity 0.15 0.27
• This shows that from 2007 to 2008 the company lost in net income for every
dollar in net sales. This means that the company is loosing money.
• The return on assets and return on equity decreased significantly in both this
means that the stockholders are loosing money off of each dollar invested.
• The loss in asset turnover means that A&F is not using properly their assets
and should look for other ways to invest in their company.

Part E. Financial Analysis
Solvency Ratio
A&F 2008 2007
Debt to
equity
0.54 0.58
• The debt to equity percentage
remains low and has increased
form 2007 to 2008 very little. This
means that the Abercrombie &
Fitch is in control of its
Companies assets.

Part E. Financial Analysis
Market Strength Ratios
A&F 2008 2007
Price
/earnings
Dividends
yield
42.81 66.56
0.02 0.008
• The decrease in
price/earnings per share
shows that the company is
failing.