Abercrombie & Fitch is clicking on all cylinders.

Implications: -          As written in the article ANF is doing well in a difficult macro economic environment which is beating down the retail sector in particular.   -          This has been achieved through both creativity, introduction of new product lines, classification extensions and lastly through good operational management both at the store level and most importunately in the merchandising and inventory management.

Analysis:  -          The management of the inventories has been nothing short of excellent. In the 4th quarter of FY ‘07 inventory/psf declined >28% while sales have been trending up >20%. Management has stated that their goal is to continue to reduce inventories by 15% - 20% while sustaining an increase in top line sales. Every retailer promises these types of #’s (or hopes for them) while ANF has shown the ability to deliver... -         


ANF has encountered challenges with their Tokyo flagship store and will feel the affects of the increase in wages, the development costs of all that is involved in the introduction and launching of new concepts and the continued international expansion. This being stated the assortment should be able to shoulder the strain of these challenges. -         


ANF is wisely showing prudence in the expansion plans internationally that demonstrates their normal lack of hubris and are looking at the #’s to develop a well thought out go forward plan in this initiative. -         


ANF was helped by the favorable tax adjustments and international expansion while at the same time increasing their I.M.U.’s and decreasing their Markdowns from last year. This resulted in an > of 80 basis points in the gross margin and bodes well for 2008. -         


There is an opportunity to grow the direct businesses while lowering the expenses associated with this channel. With the direct business growing and the continued decrease in MG&A through a more expeditious use of travel, sampling and marketing, margins should also be positively affected. -         


The introduction of Gilley Hicks and the continuation of Ruehl will in the short term have a negative affect on margins, if executed correctly these businesses will be very attractive in the incremental growth of top line in 2009 and beyond. -         


In summation ANF is showing that they are not only strong in assortment and the qualitative side of the business but are becoming very adept at inventory control and the management of operating expenses across all their businesses which makes them strong quantitatively. All this adds up to are an increase in top line sales and margins -