Q4 2023 Abercrombie & Fitch Co Earnings Call

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Unknown Executive: Good day, and thank you for standing by. Welcome to the Abercrombie & Fitch Fourth Quarter Fiscal Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Good day, and thank you for standing by.

Speaker Change: Welcome to the Abercrombie <unk> Fitch fourth quarter fiscal year 2023 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advising your hand this race to Australia.

Unknown Executive: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mohit Gupta, Vice President of Investor Relations. Please go ahead.

Speaker Change: Please press Star one again, please be advised that today's conference is being recorded.

Speaker Change: And now like to hand, the conference over to your first speaker today, Vice President of Investor Relations. Please go ahead.

Mohit Gupta: Thank you. Good morning, and welcome to our fourth quarter 2023 earnings call. Joining me today on the call are Fran Horowitz, Chief Executive Officer, and Scott Lipesky, Chief Financial Officer and Chief Operating Officer. Earlier this morning, we issued our fourth quarter earnings release, which is available on our website at corporate.abercrombie.com under the investor section. Also available on our website is an investor presentation. Please keep in mind that we will make certain forward-looking statements on the, These statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions we mentioned today. These factors and uncertainties are discussed in our reports and filings with the Securities and Exchange Commission.

Speaker Change: Thank you.

Speaker Change: Good morning, and welcome to our fourth quarter 2023 earnings call. Joining me today on the call are Fran Horowitz, Chief Executive Officer, and Scott Lukowski, Chief Financial Officer, and Chief operating Officer.

Earlier. This morning, we issued our fourth quarter earnings release, which is available on our website at corporate that Abercrombie dot com under the investors section also available on our website is an investor presentation.

Speaker Change: Please keep in mind that we will make certain forward looking statements on the call. These statements are subject to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions mentioned today the.

Speaker Change: These factors and uncertainties are discussed in our reports and filings with the Securities and Exchange Commission.

Mohit Gupta: In addition, we will be referring to certain non-GAAP financial measures during the call. Additional details and reconciliations of GAAP to adjusted non-GAAP financial measures are included in the release and the investor presentation issued earlier this morning. Finally, references to Abercrombie brands include Abercrombie & Fitch and Abercrombie Kids, and references to Hollister brands include Hollister and Gilly Hits. With that, I'll turn the call over to Fran.

Speaker Change: In addition, we will be referring to certain non-GAAP financial measures during the call additional details and reconciliations of GAAP to adjusted non-GAAP financial measures are included in the release and the Investor presentation issued earlier this morning.

Speaker Change: Finally references to Abercrombie brands include Abercrombie, <unk>, Fitch, and Abercrombie kids and references the Hollister brands include Hollister and Gilly Hicks with that I will turn the call over to Fran.

Fran Horowitz: Good morning, and thank you for joining us to discuss our fourth quarter and full year results. Since our business update in early January, we had a strong final month of the year, leading fourth quarter sales and operating margin above the high end of our outlook. From start to finish, 2023 was a defining year for our company. We saw top line growth across regions and brands, resulting in sales of $4.28 billion, up 15.8% from 2022 and our second highest annual sales level in our history. On profitability, we achieved an operating margin of 11.3%, our best in 15 years.

Fran Horowitz: Good morning, and thank you for joining us to discuss our fourth quarter and full year results.

Fran Horowitz: Since our business update in early January we had a strong final months of the year, leaving fourth quarter sales and operating margin above the high end of our outlook.

Fran Horowitz: From start to finish 2023 was a defining year for our company.

Fran Horowitz: We saw top line growth across regions and brands, resulting in sales of $4.28 billion up 15, 8% to 2022, and our second highest annual sales level in our history.

Fran Horowitz: On profitability, we achieved an operating margin of 11, 3% our best in 15 years.

Fran Horowitz: Importantly, while achieving these financial milestones, we made critical investments to strengthen our brands and companies. These investments included increased marketing to drive customer acquisition and brand loyalty, and approximately 60 new in-store experiences to reach new and current customers. Technology to improve the customer and associate experience and talented team members to drive growth today and into the future. 2023 was also a defining moment for our team, who have worked so hard over the years to evolve our operating model and what we stand for as a company. Our offices around the globe are electric with energy from all we have accomplished.

Fran Horowitz: Importantly, while achieving these financial.

Fran Horowitz: We made critical investments to strengthen our brand and company.

Fran Horowitz: These investments included increased marketing to drive customer acquisition and brand loyalty.

Fran Horowitz: <unk> 60, new in store experiences to reach new and current customers.

Fran Horowitz: <unk> technology to improve the customer and associate experience and talented team members to drive growth today and into the future.

Fran Horowitz: 2022, it's also a defining moment for our teams who have worked so hard over the years to evolve our operating model and what we stand for as a company.

Our offices around the globe are electric with energy from all we have accomplished but as always stay regularly there is no finish line and we see tremendous opportunity ahead.

Fran Horowitz: But, as I say regularly, there is no finish line, and we see tremendous opportunity ahead. While the decade-high results are certainly worth celebrating, what really stood out to me in our team is the progress we've made against our own expectations for this growth phase of our journey. In June 2022, we shared our OE's Forward Plan, a strategy that marked the entry into a growth-focused era for Abercrombie & Fitch Co. Our strong 2023 results are at or above our 2025 financial targets of $4.1 to $4.3 billion in sales at an operating margin of or above 8%. We are now setting our sights on demonstrating the sustainability of our operating model and profitability profile by repeating our success. For us, 2024 should be a proof point of our ability to balance the pursuit of new growth opportunities while also maintaining strong financial discipline.

Fran Horowitz: Well the decade, while the decade high results are certainly worth celebrating.

Fran Horowitz: Stood out to me and our team is the progress we've made against our own expectations for this growth stage of our journey.

Fran Horowitz: In June 2022, we shared are always floorplan.

Fran Horowitz: Strategy that mark the entry into a growth focus era for Abercrombie and Fitch co.

Fran Horowitz: Our strong 2020 results are at or above our 2025 financial targets of four one to $4 3 billion in sales and operating margin at or above 8%.

Fran Horowitz: We are now setting our sights on demonstrating the sustainability of our operating model and profitability profile by repeating our success for US 2024 should be a proof point of our ability to balance the pursuit of new growth opportunities, while also maintaining strong financial discipline.

Fran Horowitz: We believe we can continue our trajectory into 2024, growing across regions and brands, building to our longer-term ambition of $5 billion in global sales. Clearly, 2023 has given us confidence that we are on the right path. We're excited to be at this point in our growth journey. To give some context on how we got here, I'll respond to a question we commonly get from both new and long-term followers. What are you doing to drive this great performance? Our response has been, "There is no silver bullet."

Fran Horowitz: We believe we can continue our trajectory into 2024 growing across regions and brands building to our longer term ambition of $5 billion in global sales.

Fran Horowitz: Clearly 2023 has given us confidence that we are on the right path.

Fran Horowitz: We're excited to be at this point in our growth journey to get some context on how we got here I'll respond to a question, we commonly get from both new and long time followers what.

Fran Horowitz: Are you doing to drive this great performance. Our response has been consistent there is no silver bullet. It has been about having thousands of associates across the world aligned and executing a focused playbook every single day, one that is intimately and knowing our customer and I'm a ticket asleep.

Fran Horowitz: It has been about having thousands of associates across the world aligned and executing a focused playbook every single day. One that is rooted intimately in knowing our customers and then meticulously building the product voice and experience to match their needs. This is so much easier said than done.

Fran Horowitz: The product voice and experience to match their needs.

Speaker Change: This is so much easier said than done.

Fran Horowitz: When we refer to our years of transformation work, we're most proud of how we built the trust and the experience within our team to push boundaries as it relates to evolving our assortment, our end-to-end supply chain, enhancing our marketing, and creating digital and physical experiences that exceed our customers' expectations. Our global customer is responding, and we can see proof points in both the customers we've retained and the millions we've added to our brands this past year. From kids to teens to adults, our brand portfolio has something for them, and we have increasing confidence that we are at a stage where we can focus on capturing more customers across the globe. Relying further on 2023, our growth was broad-based, with each of our regions growing in the fourth quarter and full year. The Americas led our strong growth result by an impressive 18% from 2022.

Speaker Change: When we refer to our years of transformation work. We're most proud of how we built the trust and the experience within our team to push boundaries as it relates to evolving our assortment and to end supply chain, enhancing our marketing and creating digital and physical experiences that exceed our customers' expectations.

Speaker Change: Our global customer is responding and we can see proof points in both the customers. We've retained in the millions with added to our brands this past year.

Speaker Change: From kids to teens to adults our brand portfolio has something for them and we have increasing confidence that we are at a stage, where we can focus on capturing more customers across the globe.

Speaker Change: Recapping further on 2023, our growth was broad based with each of our regions growing in the fourth quarter and full year the.

The Americas led our strong growth resulted in an impressive 18% from 2022.

Fran Horowitz: We saw outside growth in Abercrombie brands in the region, and we are pleased to see Hollister brands grow off 2022 levels. In EMEA, we delivered 4% sales growth for the year in a difficult macro environment, with some acceleration in the back half of the year. Our team focused investments and focus on those markets where we had the highest customer awareness, mainly the UK and Germany, and we saw positive results in both countries.

Speaker Change: We saw outsized growth in Abercrombie brands in the region and we were pleased to see Hollister brands grow off 2022 levels.

Speaker Change: In EMEA, we delivered 4% sales growth for the year in a difficult macro environment with some acceleration in the back half of the year.

Speaker Change: Our team distorted investments and focus to those markets, where we had the highest customer awareness, mainly the U K and Germany, and we saw positive results in both countries.

Fran Horowitz: Our regional team was there for our MEA customers and made great strides by localizing assortments, Distorting Inventory, Fine-Tuning prices, and Adjusting Product Set Timing and Promotional Cadence. This is an important foundation that we'll look to build on moving forward. In APAC, we finished the year up 16% to 2022. We continued to build our team in Shanghai and reconnected with customers as COVID restrictions were lifted across the

Speaker Change: Our regional team was there for our customers and made great strides by localizing Assortments distorting inventory fine tuning price and adjusting product set timing and promotional cadence.

Speaker Change: This is an important foundation that we'll look to build on moving forward.

Speaker Change: In APAC, we finished the year up 16% to 2022 weeks.

Speaker Change: We continued to build our team in Shanghai, and we connected with customers as Covid restrictions were lifted across the region. Our team is approaching the business as a startup mentality testing different strategies to grow the business through targeted store and marketing investments and bring our brands to life in locally relevant ways.

Fran Horowitz: Our team is approaching the business with a startup mentality, testing different strategies to grow the business through targeted store and marketing investments. Looking at our brand portfolio, 2023 was a year of great progress for Hollister Brands. Today, the brand is a healthy, growing business because of the focus and decisive work we started in the middle of 2022. I applaud our team who showed a relentless drive to reset the assortment, brand imagery, and brand voice to meet the needs of today's shoppers. For the year, Hollister Brands grew 6%, a good turnaround from down 9% in 2022. Our growth was led by women throughout the year, delivering its third consecutive quarter of double-digit growth in Q4.

Speaker Change: Looking at our brand portfolio 2023, with a year of great progress for Hollister brands today. The brand is a healthy growing business because of the focus and decisive work we started in the middle of 2022.

Speaker Change: I applaud our team pursued a relentless drive to reset the assortment brand imagery and brand voice to meet that meet the needs of today's team.

Speaker Change: For the year Hollister brands grew 6% a good turnaround from down 9% in 2022, our growth was led by women's throughout the year delivering its third consecutive quarter of double digit growth in Q4.

Fran Horowitz: On the men's side, we continue to see progress, and we're optimistic that we'll catch up with what we're seeing in women's in the quarters to come. While we saw growth in both channels, stores outperformed digital, with around 70% of Hollister sales done in stores in 2023. The teen consumer tends to start their journey digitally, but more often finishes it in the store.

Speaker Change: On the mens side, we continue to see progress and we're optimistic that we'll catch up with what we're seeing in women's in the quarters to come.

Speaker Change: While we saw growth in both channels stores outperformed digital with around 70% of Hollister sales done in stores in 2023.

Speaker Change: The teen consumer tends to start their journey digitally but more often finishes in the store.

Fran Horowitz: Hollister Brand's growth in 2023 is even more of an achievement because we significantly improved financial health. The brand was chasing inventory throughout the year, which allowed us to reduce promotions and clearance selling to improve AUR. Coupled with significant freight cost recovery, we greatly improved Hollister's gross profit rate compared to 2022. Exiting 2023, we now have a strong foundation and three quarters of growth under our belt as we move into 2024. For Abercrombie brands, it was a year of exceptional breakout growth, up 27% to 2022. But it's part of a much longer trend.

How does the brand's growth in 'twenty two 'twenty three is even more of a achievement because we significantly improved financial health.

The brand was chasing inventory throughout the year, which allowed us to reduce promotions and clearance selling to improve AUR.

Speaker Change: Coupled with significant freight costs recovery, we greatly improved <unk> gross profit rate compared to 2022.

Speaker Change: Exiting 2023, we now have a strong foundation in three quarters of growth under our belt as we move into 2024.

Speaker Change: For Abercrombie brands. It was a year of exceptional breakout growth up 27% to 2022.

Speaker Change: It's part of a much longer trend.

Fran Horowitz: Fiscal 2023 sales of Abercrombie brands were up 50% in 2019, an impressive 10% growth CAGR including three consecutive years of double-digit growth. I've said it many times, but I am so proud of what this team has done to reposition Abercrombie & Fitch and evolve the product, voice, and experience. In this new era for Abercrombie, we're actively engaging with customers through innovative collaborations and partnerships, broadening our reach and connecting with new audiences. These two recent events are great examples of where we're going. First, in January, we partnered with McLaren Racing to showcase their Formula One livery at our 5th Avenue store.

Speaker Change: Fiscal 2023 sales Abercrombie brands were up 50% to 2019 levels, an impressive 10% growth CAGR, including three consecutive years of double digit growth.

Speaker Change: Said, it many times, but I am so proud of what this team has done to reposition abercrombie and Fitch and evolve the product voice and experience.

Speaker Change: In this new era for Abercrombie, we're actively engaging with customers through innovative collaborations and partnerships broadening our reach and connecting with new audiences.

Speaker Change: Two recent events are great examples of where we're going.

Speaker Change: First in January we partnered with Mclaren racing to showcase their formula one livery and our fifth Avenue store.

Fran Horowitz: I was there, and wow, it was a great celebration of what has become an important partnership, something we have not done to this scale in our history. We also participated in the Super Bowl in February through a comprehensive media effort culminating in a successful brand activation event in Las Vegas. These are just a couple of events that help us deepen our customer connections, and our Abercrombie team has even more planned for the coming quarter. As a company, we've been able to deliver financial results at or above our 2025 Always Forward Plan targets in our first year, a significant achievement. Beyond these benchmarks, we also owe our stakeholders consistency and sustainability of both sales growth and profitability. While we must acknowledge potential challenges we see from global macroeconomic and geopolitical instability, we have proven our ability to control what we can control.

Speaker Change: I was there and Wow. It was a great celebration of what has become an important partnership something we had not done to the scale in our history.

Speaker Change: We also participated in the Super Bowl in February to a comprehensive media effort, culminating in a successful brand activation event in Las Vegas.

Speaker Change: These are just a couple of events that help us deepen our customer connections in our Abercrombie team is even more planned in the coming quarters.

Speaker Change: As a company, we've been able to deliver financial results at or above our 2025 always forward planned targets in our first year a significant achievement.

Speaker Change: These benchmarks, we also our stakeholders consistency and sustainability of our sales and growth sales growth and profitability.

Speaker Change: While we must acknowledged potential challenges, we see from global macroeconomic and geopolitical instability, we have proven our ability to control what we can control.

Fran Horowitz: We aim to win in this new chapter for our company across a variety of consumer environments by sticking to our playbook and remaining close to our customers, all of which is in focus for us heading into 2024. For Abercrombie Brands, with its impressive multi-year growth trend, we are confident that our positioning and assortments are meeting the needs of our customers, and we're focused on growing the global customer base. I'm a product in 2024.

We aim to win in this new chapter for our company across a variety of consumer environment.

Speaker Change: By sticking to our playbook and remain in close to our customers all of which is in focus.

Speaker Change: US heading into 2024.

Speaker Change: For Abercrombie brands with their impressive multiyear growth trend, we are confident that our positioning and assortments are meeting the needs of our customers and we're focused on growing the global customer base.

Speaker Change: Product in 2024, we will continue to deliver compelling assortments with newness and depth across categories, while continuing to build on key collections like our wedding shop and extension of best dressed guest which launches this week.

Fran Horowitz: We will continue to deliver compelling assortments with newness and depth across categories while continuing to build on key collections like our wedding shop, an extension of best dressed guests, which launches this week. These collections have been successful in both attracting and retaining customers. We believe the customer is also our best advocate, and we expect to increase our investments in marketing, particularly social media, to position Abercrombie in an authentic, relevant way to more customers. Finally, on experience, we expect to be a net store opener while both expanding our successful neighborhood concept and filling in gaps in great shopping centers across the world. In Hollister Brands, we have recouped a portion of sales lost in 2022, and we plan on investing in key growth initiatives in 2024 to continue the momentum. We believe the assortment is well aligned, that women's business is performing well, and we're seeing signs of improvement in men. Both genders are executing our core principles of testing and chasing, with the assortment coming along.

Speaker Change: These collections have been successful in both attracting and retaining customers.

Speaker Change: We believe the customers also our best advocates and we expect to increase our investments in marketing, particularly social media to position Abercrombie and authentic relevant way to more customers.

Speaker Change: Finally on experience, we expect to be a net store opening while both expanding our successful neighborhood concept and filling in gaps in great shopping centers across the world.

Speaker Change: And Hollister brands, we have recouped a portion of the sales loss in 2022, and we plan on investing in key growth initiatives in 2024 to continue the momentum.

Speaker Change: We believe the assortment is well aligned that.

Speaker Change: Women's business is performing well and we're seeing signs of improvement in men's.

Speaker Change: Both genders of executing our core principles of testing and chasing with the assortment coming along we increased marketing in the back half of 2023, and we expect that to continue into 2024.

Fran Horowitz: We increased marketing in the back half of 2023, and we expect that to continue into 2024. We also expect to continue to deliver new store experiences while investing in digital to support the teen's journey. As an update on Gilly Hicks, we transitioned the assortment to an active lifestyle in 2023, and the results have shown great promise, contributing to Hollister's growth results while offering a product category our customers have been asking for. Going forward, we intend to focus our go-to-market strategy primarily on Hollister-led selling channels, including Hollister Stores, Digital & App, and Hollister Gilly Side-by While we secretly hooked up with a key growth category for Hollister as a company, we are prioritizing higher return growth opportunities at Abercrombie & Fitch and Hollister in the near term. We will maintain a couple of freestanding Gilly stores to continue learning about the assortment and customer potential. For Social Tourists, we moved the brand to digital only in the back half of 2023 and will offer minimal skews in 2024.

Speaker Change: We also expect to continue to deliver new store experiences while investing in digital to support the teens journey.

Speaker Change: As an update on Gilly Hicks, we transition the assortment to an active lifestyle in 2023 and the results have shown great promise contributing to hausers growth results, while offering a product category or customer has been asking for going forward. We intend to focus our go to market strategy, primarily on Hollister led selling channels, including Hollister stores.

Speaker Change: Digital and App and Hollister Gilly side by sides.

Speaker Change: While we see Gilly Hicks as a key growth category for Hollister as a company. We are prioritizing higher return growth opportunities Abercrombie <unk> Fitch and Hollister in the near term.

Speaker Change: We will maintain a couple freestanding geely stores to continue learning about the assortment and customer potential risk.

Speaker Change: For social tourists they've moved the branded digital only in the back half of 2023 and will offer minimal SKU Skus in 2024, we've enjoyed our partnership with familiar families and appreciate the opportunity to develop product and social strategies with them.

Fran Horowitz: We've enjoyed our partnership with the D'Amelio family and appreciate the opportunity to develop product and social strategies with them. Global growth is a very important part of our always forward plan, and we intend to put greater emphasis on the expansion of our MEA and APAC regions. Over the past year, we've made significant progress building our local teams, responsibilities, and resetting the foundation across product, pricing, and inventory. In EMEA, we expect increased marketing across brands to drive awareness around the evolved brand positioning and product offering for each brand. Our marketing push will focus on the UK and Germany, our two largest countries in the region.

Speaker Change: Global growth is a very important part of our <unk> plant and we intend to put greater emphasis on expansion of our EMEA and APAC regions over the past year, we've made significant progress building our local teams responsibilities in resetting the foundation across product pricing and inventory.

Speaker Change: In EMEA, we expect increased marketing across brands to drive awareness around the evolved brand positioning and product offering for each brand.

Speaker Change: Our marketing push will focus on the UK and Germany are two largest countries in the region and.

Fran Horowitz: In APAC, our goal is to continue to deliver focused growth across China and Japan. We expect to strategically add store locations in key cities to improve our density and brand awareness. From there, we'll focus on driving digital growth across key platforms. We entered 2024 in a position of strength with momentum across our global business. We are laser focused on building on this strength, and the first quarter is off to a strong start. I'm so proud of what our global teams have accomplished over the past few years.

Speaker Change: In APAC, our goal is to continue to deliver focus growth across China and Japan.

Speaker Change: We expect to strategically add store locations in key cities to improve our density and brand awareness from there we will focus on driving digital growth across key platforms.

Speaker Change: We've entered 2024 and a position of strength with momentum across our global business. We are laser focused on building on our strength in the first quarter is off to a strong start.

Speaker Change: I'm so proud of our global teams have accomplished over the past few years.

Fran Horowitz: Hard work rebuilding our foundation and engaging with our customers is showing up in our financial results. In 2024, our goal is to deliver sustainable, profitable growth while making key investments in our people, brands, and operations to make our company faster and stronger, progressing to a longer-term $5 billion sales aspiration. A heartfelt thanks goes out to our global team that delivered such a fantastic year for ARC. With that, I'll hand it over to Scott. Thanks Fran, and good morning.

Speaker Change: The hard work rebuilding our foundation and engaging with our customers is showing up in our financial results and.

In 2024, our goal is to deliver sustainable profitable growth, while making key investments in our people brands and operations to make our company faster and stronger progressing to a longer term 5 billion sales aspiration.

Speaker Change: A heartfelt thanks goes out to our global team that delivered such a fantastic year for our customers and with that I'll hand, it over to Scott.

Scott D. Lipesky: Thanks, Brian and good morning, I'll add my thanks to our global teams for executing at such a high level in 2023.

Scott D. Lipesky: I'll add my thanks to our global teams for executing at such a high level in 2023. As Fran said, we are not done. After years of transforming our brands and operating model, we have a clear growth mindset for the company as we enter 2020. I'll start by covering Q4 results along with a quick rundown of our full year 2023 performance. And, last but not least, all comparisons are to the respective 2022 fiscal period

Scott D. Lipesky: As Fran said, we are not done.

Scott D. Lipesky: After years of transforming our brands and operating model, we have a clear growth mindset of the company as we enter 2024.

Speaker Change: I'll start by covering Q4 results along with a quick rundown of our full year 2023 performance.

Speaker Change: Unless noted all comparisons are to the respective 2022 fiscal period.

Scott D. Lipesky: I'll then provide some color on our 2024 outlook. For Q4, we delivered net sales of $1.45 billion, up 21% on a reported basis. This was above the range we provided in early January due to a better than expected finish to the month. Comparable sales for the quarter were up 16%, with both stores and digital contributing. We saw a $50 million benefit from the 53rd reporting week, which was slightly higher than our previous outlook.

Speaker Change: I'll then provide some color on our 2020 for outlook for Q4, we delivered net sales of $1 45 billion up 21% on a reported basis.

Speaker Change: This was above the range we provided in early January due to a better than expected finish of the month.

Speaker Change: Comparable sales for the quarter were up 16% with both stores and digital contributing.

Speaker Change: We saw a $50 million benefit from the 53rd reporting week up slightly to our previous outlook.

Scott D. Lipesky: By region, net sales increased 23% in the Americas on a reported basis and 17% on a comparable sales basis. Amaya was up 13% on a reported basis and 10% on a comparable basis. APAC was up 21% on both the reported and comp-based. In EMEA, growth was led by our largest two countries, the UK and Germany, where we are focusing our marketing and brand awareness efforts. In APAC, growth was consistent across the owned and operated markets of China and Japan. From a brand perspective, we saw growth across brands in the quarter. Net sales at Abercrombie Brands rose 35% on a reported basis, with comparable sales up 28%.

Speaker Change: By region net sales increased 23% in the Americas on a reported basis and 17% on a comparable sales basis.

Speaker Change: EMEA was up 13% on a reported basis and 10% on a comp basis.

Speaker Change: APAC was up 21% on both a reported and comp basis in EMEA growth was led by our largest two countries. The U K and Germany, where we are focusing our marketing and brand awareness efforts.

Speaker Change: In APAC growth was consistent across the owned and operated markets of China and Japan.

Speaker Change: From a brand perspective, we saw growth across brands in the quarter net.

Speaker Change: Net sales at Abercrombie brands rose, 35% on a reported basis with comparable sales up 28%.

Scott D. Lipesky: Hollister Brands increased 9% or 6% on a comp basis. For the quarter, the gross profit rate was 62.9% versus 55.7% last year. Key drivers of the year-over-year change were higher AURs across brands, contributing 430 basis points, with the remaining 290 basis points associated with lower freight and raw material costs. Cotton costs were relatively consistent with 2022 levels.

Speaker Change: Hollister brands increased 9% or 6% on a comp basis.

Speaker Change: For the year, the gross profit rate for the quarter gross profit rate was 62, 9% versus 55, 7% last year.

Speaker Change: Key drivers of the year over year change were higher AUR across brands contributing 430 basis points with the remaining 290 basis points associated with lower freight and raw material costs.

Speaker Change: Cotton costs were relatively consistent with 2022 levels.

Scott D. Lipesky: Product acceptance and tightly controlled inventory were key enablers of the AUR growth. Inventory ended the year down 7% to 2022, and each brand is in a position to change. Q4 operating expense, excluding other operating income, was $692 million compared to adjusted operating expense of $575 million last year. We excluded 4.7 million of pre-tax asset impairment charges in the fourth quarter of 2022.

Speaker Change: Acceptance and tightly controlled inventory were key enablers of the AUR growth.

Speaker Change: Inventory ended the year down 7% to 2022 and each brand is in a position to chase.

Speaker Change: Q4 operating expense, excluding other operating income was $692 million compared to adjusted operating expense of $575 million last year.

We excluded $4 7 million of pretax asset impairment charges in the fourth quarter of 2022.

Scott D. Lipesky: Year-over-year expense growth was driven by higher marketing spend, incentive-based compensation, digital and technology investments, and the 53rd reporting period. In total, we delivered slight expense leverage in the quarter. Operating income was $223 million, more than double the adjusted operating income of $92 million last year. Operating margin was 15.3% compared to an adjusted operating margin of 7.6% last year. The tax rate for the quarter was 29%, and net income per diluted share was $2.97 compared to $0.81 last year. Turning to full-year results, which I'll cover on an adjusted, non-GAAP basis. Full-year results exclude approximately $4 million of pre-tax asset impairment charges, which adversely impact the results by six cents. In 2022, we excluded 14 million of pre-tax asset impairment charges, which adversely impacted results by 20%.

Year over year expense growth was driven by higher marketing spend and incentive based compensation digital and technology investments and the 53rd reporting week.

Speaker Change: In total we delivered slight expense leverage in the quarter.

Speaker Change: Operating income was $223 million more than double the adjusted operating income of $92 million last year.

Speaker Change: Operating margin was 15, 3% compared to adjusted operating margin of seven 6% last year.

Speaker Change: Tax rate for the quarter was 29% and net income per diluted share was $2 97.

Speaker Change: Impaired to 81 last year.

Speaker Change: Turning to full year results, which I'll cover on an adjusted non-GAAP basis.

Speaker Change: <unk> full year results exclude approximately $4 million of pretax asset impairment charges, which adversely impacted results by <unk> <unk>.

Speaker Change: In 2022, we excluded $14 million of pre tax asset impairment charges, which adversely impacted results by 20.

Scott D. Lipesky: For the year, net sales were $4.28 billion, up 16% and represented our second highest sales level in the history of the company. Comparable sales for the quarter were up 13%. For the year, we saw a benefit of approximately $50 million for the 53rd reporting week and a slight benefit from next door open. We deliver growth across regions, with the majority of growth coming from the Americas. Sales are up 18% in the Americas, 4% in EMEA, and 16% in APAC. By brand, Abercrombie Brands led the way with 27% growth on a reported basis and 23% growth on a comparable sales basis.

Speaker Change: For the year net sales were $4 $2 8 billion up 16% and represented our second highest sales level in the history of the company.

Speaker Change: Comparable sales for the quarter up 13%.

Speaker Change: For the year, we saw a benefit of approximately $50 million for the 53rd reporting weak and a slight benefit from net store openings.

Speaker Change: We delivered gross growth across regions with the majority of growth coming from the Americas.

Speaker Change: Sales were up 18% in the Americas, 4% in EMEA and 16% in APAC.

Speaker Change: By brand Abercrombie brands led the way with 27% growth on a reported basis and 23% growth on a comparable sales basis we.

Scott D. Lipesky: We saw double-digit sales growth in both men's and women's. At Hollister Brands, we delivered total sales growth of 6% and 4% on a comp-based basis. Growth was led by the Women's Business and the Source Channel; gross profit rate was 62.9% compared to 56.9% in 2022. Of the 600 basis point improvement, we saw around half come from higher AURs and around half come through the net of lower freight and higher raw material costs. Operating expense, excluding other operating income, was $2.2 billion, or 51.6% of sales, compared to $2.0 billion, or 54.1% of sales in Compared to last year, the dollar increase was primarily driven by marketing, incentive-based compensation, and digital and technology investment. We also saw variable expenses increase with higher sales and had added expenses in the 53rd reporting week. Adjusted Operating Income was $489 million, or 11.4% of sales, compared to $107 million, or 2.9% of sales last year. The increase was driven primarily by a higher gross profit rate, as well as operating expense leverage on strong sales growth. The effective tax rate for the year was 31%.

Speaker Change: We saw double digit sales growth in both mens and womens.

Speaker Change: At Hollister brands, we delivered total sales growth of 6% and 4% on a comp basis growth was led by the women's business and the <unk> channel.

Speaker Change: Gross profit rate was 62, 9% compared to 56, 9% in 2022.

Speaker Change: Of the 600 basis point improvement, we saw around half come from higher AUR and Ralph have come through the net of lower freight and higher raw material costs.

Speaker Change: Operating expense, excluding other operating income was $2 2 billion or 51, 6% of sales compared to $2 8 billion or 54, 1% of sales in 2022.

Speaker Change: Compared to last year. The dollar increase was primarily driven by marketing incentive based compensation and digital and technology investments.

Speaker Change: We also saw variable expenses increase with higher sales and had added expense in that 53rd reporting week.

Speaker Change: Adjusted operating income was $489 million or 11, 4% of sales compared to $107 million or two 9% of sales last year.

Speaker Change: The increase was driven primarily by higher gross profit rate as well as operating expense leverage on strong sales growth.

Speaker Change: The effective tax rate for the year was 31% net.

Scott D. Lipesky: Net income for diluted share was $6.28 compared to $0.25 in 2022. Moving to the balance sheet, we exited the year with cash and cash equivalents of $901 million and total liquidity of approximately $1.2 billion. For the year, we had an operating cash flow of $653 million.

Speaker Change: Net income per diluted share was $6 28, compared to 25 and 2022.

Speaker Change: Moving to the balance sheet, we exited the year with cash and cash equivalents of $901 million and total liquidity of approximately $1 2 billion.

Speaker Change: For the year, we had operating cash flow of $653 million.

Scott D. Lipesky: We spent $158 million on capital expenditures, with $75 million spent on digital and technology, and the remainder spent on stores and maintenance. For the year, we repurchased a total of $77 million of par value Senior Secured Notes on the open market, ending the year with $223 million outstanding. We ended the year with 765 stores across 5 million gross square feet. We delivered 57 new store experiences, including 35 new stores, 9 right-sized stores, and 13 remodels. We also closed 32 stores. Compared to 2019, our ending 2023 store count was down around 10%. While gross square footage was down 21%, store occupancy was down 24%.

Speaker Change: We spent 158 million on capital expenditures with 75 million spent on digital and technology and the remainder spent on stores and maintenance.

Speaker Change: For the year, we repurchased a total of $77 million of par value senior secured notes on the open market ending the year with $223 million outstanding.

Speaker Change: We ended the year with 765 stores across 5 million gross square feet. We.

Speaker Change: We delivered 57, new store experiences, including 35, new stores nine right sizes and 13 Remodels. We also closed 32 stores.

Speaker Change: Compared to 2019, our ending 2023 store count was down around 10%, while gross square footage was down 21% store occupancy was down 24% and productivity per square foot was up 18%.

Scott D. Lipesky: And productivity per square foot was up 18%. This improved productivity in the store channel, coupled with significant growth in digital, are key drivers of our improved profitability profile as we move into 2024. In 2024, we entered the year with momentum across regions and brands, a strong balance sheet, controlled inventory, and marketing investments in the back half of 2023, giving us confidence that we are executing well in those areas within our control. From a macro perspective, we are closely tracking the geopolitical landscape. For the full year, we expect net sales growth in the range of four to 6% from $4.28 billion in 2023, with full year growth expected across regions and brands. This includes the net adverse impact of approximately $50 million from the loss of the 53rd reporting week in 2023.

Speaker Change: This improved productivity in the store channel coupled with significant growth in digital are key drivers of our improved profitability profile as we move into 2024.

Speaker Change: On 2024, we entered the year with momentum across regions and brands, a strong balance sheet controlled inventory and marketing investments in the back half of 2023, giving us confidence that we are executing well on those areas within our control.

Speaker Change: From a macro perspective, we are closely tracking the geopolitical landscape.

Speaker Change: For the full year, we expect net sales growth in the range of 4% to 6% from $4 billion to $8 billion in 2023 with full year growth expected across regions and brands.

This includes a net adverse impact of approximately $50 million from a loss of the 53rd reporting week in 2023.

Scott D. Lipesky: While we expect growth in both the first and second halves of the year, we expect the rate of growth to be higher in the first half, partially due to calendar shifts stemming from the 53rd week. We expect a full-year operating margin around 12%. In terms of drivers, we expect modest gross profit rate improvement from lower cotton and other raw material costs. Consistent with past practice, we entered the year assuming minimal full-year AUR growth after strong growth the past few years. On freight, we had expected, we discussed some minor benefits trickling into 2024, but we now expect those remaining benefits to be more than offset by impacts from the red. We will continue to read and react as the situation evolves in 2024, leveraging a strong supply chain playbook we've built over the years.

Speaker Change: While we expect growth in both the first and second half of the year, we expect the rate of growth will be higher in the first half partially due to calendar shifts stemming from the 50 <unk> week.

Speaker Change: We expect our full year operating margin around 12%.

Speaker Change: In terms of driver drivers, we expect modest gross profit rate improvement from lower cotton and other raw material costs.

Speaker Change: Consistent with past practice, we entered the year, assuming minimal full year AUR growth after strong growth the past few years.

Speaker Change: On freight we had expected we discussed some minor benefits trickling into 2024, but we now expect those remaining benefits to be more than offset by impacts from the red Sea.

Speaker Change: We will continue to read and react as the situation evolves in 2024, leveraging our strong supply chain playbook, we built over the years.

Scott D. Lipesky: For operating expense, at the midpoint of our sales outlook, we are not expecting much leverage or deleverage. We will continue to drive our technology investment plans forward, including our retail merchandising ERP upgrade, which continues into 2024. For the tax rate, we are forecasting a rate in the mid to high 20s, which remains elevated to pre-pandemic levels based on the expected regional mix of income. For capital allocation, we expect capital expenditures of approximately $170 million.

Speaker Change: For operating expense at the midpoint of our sales outlook, we are not expecting much leverage or deleverage.

Speaker Change: We'll continue to drive our technology investment plan forward, including our retail merchandising ERP upgrade which continues into 2024.

Speaker Change: For the tax rate, we are forecasting a rate in the mid to high Twenty's, which remains elevated to pre pandemic levels based on the expected regional mix of income.

Speaker Change: For capital allocation, we expect capital expenditures of approximately $170 million we.

Scott D. Lipesky: We expect around $80 million to be spent on digital and technology and around $90 million on stores and vendors. On stores, we expect to deliver around 75 new experiences, including 45 new stores and 30 right-sized or remodels. We also expect to be net store openers, with our 45 new store openings outpacing around 30 anticipated closures. On liquidity, we expect to continue putting excess cash to work, including through share and debt repurchases pending business and market conditions. Entering 2024, we have approximately 232 million remaining on the 500 million share repurchase authorization established in November of 21, 2017. We expect to buy back shares during the balance of the year with the objectives of offsetting anticipated dilution from share-based compensation and returning excess cash to shareholders. We also expect to further pay down debt through repurchases of outstanding senior secured notes where market conditions and pricing allow.

Speaker Change: We expect around $80 million to be spent on digital and technology and around $90 million in stores and maintenance.

Speaker Change: On stores, we expect to deliver around 75, new experiences, including 45, new stores and 30 right sizes or remodels.

Speaker Change: We also expect to be net store openings with our 45, new store openings outpacing around 30 anticipated closures.

Speaker Change: On liquidity, we expect to continue putting excess cash to work, including through share and debt repurchases pending business and market conditions.

Speaker Change: Entering 2024, we have approximately $232 million remaining on our $500 million share repurchase authorization established in November of 'twenty one.

Speaker Change: We expect to buy back shares during the balance of the year with the objectives of offsetting anticipated dilution from share based compensation and returning excess cash to shareholders.

Speaker Change: We also expect to further pay down debt through repurchases of outstanding senior secured notes where market conditions and pricing allow.

Scott D. Lipesky: For the first quarter of 2024, we expect net sales to be up low double digits to the Q1 2023 level of 836 million, including a slight benefit from the calendar shift from the 53rd week and assumed growth across regions and brands. This is supported by a strong start to the first quarter. We expect operating margin to be in the range of 8% to 10% compared to adjusted operating margin of 4.6% in Q1 2023. We expect the year-over-year improvement to be primarily driven by gross profit rate improvement. And a tax rate around 10%, which is lower than the company's statutory federal income tax rate, primarily due to anticipated discrete federal income tax benefits related to the vesting of share-based compensation. The rate is also sensitive to the company's actual stock price on the vesting day.

Speaker Change: For the first quarter of 2024, we expect net sales to be up low double digits to the Q1 2023 level of $836 million, including a slight benefit from the calendar shift from a 50, <unk> week and assumed growth across regions and brands.

Speaker Change: This was supported by a strong start to the first quarter.

Speaker Change: We expect operating margin to be in the range of 8% to 10% compared to adjusted operating margin of four 6% in Q1 2023.

Speaker Change: We expect the year over year improvement to be primarily driven by gross profit rate improvement.

Speaker Change: And a tax rate around 10%, which is lower than the company's statutory federal income tax rate, primarily due to anticipated discrete federal income tax benefits related to the vesting of share based compensation.

Speaker Change: The rate is also sensitive to the company's actual stock price on the vesting dates.

Speaker Change: To finish up we're about halfway through our 2025 always forward plan as we look to 2024, we are focusing on delivering sustainable profitable growth.

Scott D. Lipesky: To finish up, we're about halfway through our 2025 Always Forward Plan. As we look to 2024, we are focusing on delivering sustainable, profitable growth. Since we launched the plan in June of 2022, we have made progress across each pillar.

Speaker Change: Since we launched the plan in June of 2022, we have made progress across each pillar.

Speaker Change: I will focus brand growth, we've delivered outsized growth in Abercrombie brands as planned while stabilizing and growing a healthy business in Hollister.

Scott D. Lipesky: On Focus Brand Growth, we have delivered outsized growth in Abercrombie brands as planned, while stabilizing and growing a healthy business in Hollis. On our digital revolution, we have added talent, evolved ways of working, and made progress towards modernizing key technology platforms. For financial discipline, we have greatly improved cash flow, reduced debt levels, and used sales outperformance to accelerate investments in targeted areas, like marketing, to support further growth. We look forward to continuing to execute against this plan in 2024. With that, Operator, we are ready for questions. Thank you. As a reminder, to ask a question, you'll need to press star 11 on your telephone. To withdraw your question, please press star 11 again.

Speaker Change: For our digital evolution, we have added talent evolved ways of working and made progress towards modernizing key technology platforms.

Speaker Change: Our financial discipline, we have greatly improved cash flow reduce debt levels and your sales outperformance to accelerate investments in targeted areas like marketing to support further growth. We look forward to continuing to execute against this plan in 2024 with that operator, we are ready for questions.

Speaker Change: Thank you.

Speaker Change: As a reminder to ask a question you will need to press star one on your telephone.

Speaker Change: Sorry. Your question. Please press Star one again, please wait for your name to be announced we ask that you. Please limit your questions to one and one follow up please standby will be compile the Q&A roster one moment for your first question. Please.

Speaker Change: Our first question comes from the line of Dana Telsey with Telsey Advisory Group. Your line is now open.

Unknown Executive: Please wait for your name to be announced. We ask that you please limit your questions to one and one follow-up. Please stand by while we compile the Q&A roster. One moment for our first question, please. Our first question comes from the line of Dana Telsey with Telsey Advisory Group. Your line is now open.

Dana Lauren Telsey: Hi, good morning, everyone and congratulations on a terrific year and look forward to continuing to see the path of progress in 2024.

Dana Lauren Telsey: Couple of questions Hollister continues to show Nice improvement you've mentioned brand that it's led by women's what are you seeing on the men side and what's your outlook for what the markers are for success and Hollister. This year that youre seeing on the product side and also when you talked about Gilly Hicks any other updates there in terms of how we should think about.

Fran Horowitz: Hi, good morning, everyone, and congratulations on a terrific year. I look forward to continuing to see the path of progress in 2024. A couple questions. Hollister continues to show nice improvement. You've mentioned, Fran, that it's led by women. What are you seeing on the men's side?

Dana Lauren Telsey: That is a growth vehicle going forward and Scott you mentioned, the Red Sea, having more of an impact timing of that impact margin impact of that impact and how do you see AUR is progressing thank you.

Fran Horowitz: And what's your outlook for what the markers are for success in Hollister this year that you're seeing on the product side? Also, when you talked about Gilly Hicks, any other updates there in terms of how we should think about that as a growth vehicle going forward? And Scott, you mentioned the Red Sea having more of an impact.

Thanks, Dan and good morning, Yes, what an amazing and exciting year here at Abercrombie.

Speaker Change: I'll just start with your first question about Hollister very proud of the team as you know coming out of 2022, they really dug in to figure out what pieces were owned by us and what was happening in the greater macro world and they were able to really uncover some product opportunities. So returning to growth for 2023 letters.

Unknown Executive: Timing of that impact, the margin impact of that impact, and how do you see AURs progressing? Thank you. Thanks, Dana. Good morning.

Fran Horowitz: Yes, what an amazing and exciting year here at Abercrombie. To start with your first question about Hollister, I'm very proud of the team. As you know, coming out of 2022, they really dug in to figure out what pieces were owned by us and what was happening in the greater macro world. And they were able to really uncover some product opportunities.

Speaker Change: You mentioned by the women's business and that's across all categories. We are seeing progress on some green shoots and guys. We see a very strong bottoms business, they've been able to diversify out of denim and theres lots of categories in the bottoms that are selling and our expectation is to continue to see this progress throughout the year.

Fran Horowitz: So returning to growth for 2023, led, as you mentioned, by the women's business, and that's across all categories. We are seeing progress in some green shoots, and guys, we see a very strong bottoms business. They've been able to diversify out of denim, and there are lots of categories on the bottoms that are selling. And our expectation is to continue to see this progress throughout the year. Regarding Gilly, again, we are excited about the growth of Gilly. She had a nice year.

Speaker Change: <unk> Gili again, we are excited about the growth of Gilead Geely had a nice year.

Speaker Change: Been a journey of learning for us that we've discussed many times in the <unk>.

Speaker Change: Exciting thing is that it's contributing to the growth of Hollister. So we have been able to pivot that brand per customers' feedback to really being an active lifestyle focused brand and thats, what theyre continuing to respond to so as we mentioned we do carry it in all the stores around the world. The side by sides will remain will actually have some freestanding stores as well to continue to test and <unk>.

Fran Horowitz: It's been a journey of learning for us that we've discussed many times, and the exciting thing is that it's contributing to the growth of Hollister. So we have been able to pivot that brand, per customer feedback, to really be an active, lifestyle-focused brand, and that's what they're continuing to respond to. So as we mentioned, you know, we do carry it in all the stores around the world. The side-by-sides will remain.

Speaker Change: But we're excited to see what it's contributing.

Speaker Change: Okay, Dana let me chime in here for the last two so on the Red Sea first a huge thanks to our supply chain team planning teams sourcing teams for the read and react over the past couple of months, obviously the situation is evolving rapidly.

Fran Horowitz: We'll actually have some freestanding stores as well to continue to test and learn, but we're excited to see what it contributes. Okay, Dana, let me chime in on the last two.

Dana Lauren Telsey: When we think about impact this is mostly an impact to the European market for US a lot of shipping goes through that area. Our teams have been reading reacting changing modes whenever they need to do to get the product here at the right time at the best price.

Scott D. Lipesky: So on the Red Sea, first, a huge thanks to our supply chain team, planning team, and sourcing teams for the read and react over the past couple months. Obviously, the situation is evolving rapidly. When we think about impact, you know, this is mostly an impact on the European market for us. You know, a lot of shipping goes through that area.

Dana Lauren Telsey: Obviously, we've seen you've seen this <unk> seen shipping rates elevates kind of around the world that has this has transpired little different by lane. So we are seeing some friction there on shipping costs that will be more of kind of Q2 into the back half thing as those higher shipping costs start to flow through I would say in total on freight for the year, we had talked a little bit about.

Scott D. Lipesky: Our teams have been reading, reacting, changing modes whenever they need to do to get the product here, you know, at the right time, at the best price. Obviously, we've seen shipping rates elevate kind of around the world as this has transpired, you know, a little different by lane. So we are seeing some friction there on shipping costs.

Dana Lauren Telsey: Some benefits rolling into the year, we think that'll be more than offset by the red Sea. So freight not a lot happening there for this year and the total year.

Dana Lauren Telsey: The second piece was AUR, we've made amazing progress here over the past three or four years and are consistent with last year and our goal is sitting here today at the outset of the year is to hold those AUR as our margins in a really strong place exiting 2023, and we will see what happens we say it all the time, but the best ways to raise your AUR is controlling your inventory and having a <unk>.

Scott D. Lipesky: That'll be more of kind of a Q2 into the back half thing as those higher shipping costs start to flow through. I'd say in total on freight for the year. We had talked a little bit about some benefits rolling into the year, but we think that'll be more than offset by the Red Sea.

Dana Lauren Telsey: Product acceptance. So we're going to continue to work on those two things as we go throughout the year.

Scott D. Lipesky: So freight, you know, not a lot happened in there for this year in the total year. And then the second piece was AURs. We've made amazing progress here over the past three, four years on our AURs, consistent with last year. You know, our goal sitting here today at the outset of the year is to hold those AURs. Our margins are in a really strong place exiting 2023. And we'll see what happens.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from the line of Cory <unk> with Jefferies. Your line is now open.

Cory: Great. Thanks, Fran the success of the Abercrombie brand has been.

Cory: Nothing short of Amazing and I think now as of this fiscal year. The company has now approached record levels of sales at the Abercrombie segment. So how do you think about what's worked for the business within the last.

Unknown Executive: You know, we say it all the time, but the best way to raise your AURs, control your inventory, and have great product acceptance is so we're going to continue to work on those two things as we go throughout the year. Thank you. One moment for our next question. Our next question comes from the line of Corey Tarlowe with Jeffries.

Cory: 12 to 24 months since you put foresee always forward plan and then within the context of that.

Cory: Always forward plan, how do you think about what are the vectors of growth that youll likely leverage over the next several years as you think about continuing to drive growth at Abercrombie because it seems to be an increasingly promising trajectory.

Fran Horowitz: Your line is now open. Great, thanks, Fran. The success of the Abercrombie brand has been nothing short of amazing, and I think now, as of this fiscal year, the company has now approached record levels of sales at the Abercrombie segment. So how do you think about what's worked for the business within the last 12 to 24 months since you put forth the Always Forward Plan? And then, within the context of that Always Forward Plan, how do you think about what are the vectors of growth that you'll likely leverage over the next several years as you think about continuing to drive growth at Abercrombie because it seems to be on an increasingly promising trajectory? And then Scott, just on the outlook, you mentioned that you're expecting revenue to be up low double digits in the first quarter. Is that where you're tracking at the moment? And then how do you bridge that with the full year revenue growth guidance of up four to six percent from up low double digits in the first quarter? All right, Corey. Good morning.

Cory: And then Scott just on the outlook.

Speaker Change: You mentioned that you are expecting revenue to be up low double digits in the first quarter is that where you're tracking at the moment and then how do you bridge that with the full year revenue growth guidance of up 4% to 6% from up low double digits in the first quarter.

Speaker Change: Alright Corey.

Corey: Good morning.

Corey: And first of all thank you, yes, it wasn't an absolutely amazing year for the company as well as for the Nf brands, I mean to see growth across brands regions and channels.

Corey: It's just been incredible and add up to your point, we have seen a 50% increase in the family of brands with an absolute 2019, and a 10% CAGR with double digits for three years with that happening. The reason behind that is that our playbook is working we have been able to really expand.

Fran Horowitz: And first of all, thank you. Yes, it was an absolutely amazing year for the company, as well as for the A&F brands. I mean, to see growth across brands, regions, and channels. It's just been incredible. And A&F, to your point, we have seen a 50% increase in the family of brands of A&F since 2019, and a 10% CAGR with double digits for three years with that happening. The reason behind that is that our playbook is working.

Corey: The addressable market for Abercrombie adults, particularly.

Corey: So it is no longer at jeans and T shirt company is truly a lifestyle brand. So the addressable market has gone from the early twenties to easily through the late thirties, and we've broadened all of the offerings and the category perspective, So today, where we talk about things like <unk>, our active brand.

Fran Horowitz: We have been able to really expand the addressable market for Abercrombie adults, particularly. So it is no longer a jeans and t-shirt company; it's truly a lifestyle brand. So the addressable market has gone from the early 20s to easily through the late 30s, and we've broadened all the offerings from a category perspective. So today, where we talk about things like YPB, our active brand, and best-dressed guests, this week, we're launching our wedding shop, which is another exciting bit of information that we learned from staying close to the customer and how important the wedding journey is and how many occasions we So our expectation is to continue to see these ideas coming from the team and helping us understand what the consumer is looking for and continuing to grow all of those categories. So, in 2024, as we said, you know, we're focused on sustainable, profitable growth, and frankly, there's just, there's no finish line. Okay, on the outlook. So let's start by kind of breaking up the year.

Corey: Dressed guests. This week, we are launching our wedding shop, which is another exciting bit of information that we learned from staying close to the customer and how important the wedding journey isn't how many occasions, we can dress them for so our expectation is to continue to see these ideas coming from the team in helping us understand what the consumers looking for and continuing to grow.

Corey: All of those categories. So 2024, as we said.

Corey: Focus on sustainable profitable growth and frankly, there is just there is no finish line.

Okay on the outlook, so let's start with kind of break it out a year. So yes, we expect growth in both halves will start there we do expect the growth rate to be higher in the first half will get a little bit of a help here from this 50 <unk> week nuance on the calendar shift and really it comes down to visibility Corey sitting here today, we had a nice start to the quarter a strong start to the quarter.

Corey: That's baked into our first quarter outlook here of up low double digits and with how fast. This world is changing and just the geopolitical landscape changes so quickly finding it hard to be super aggressive here and a reason to be super aggressive on the back half sitting here in March of this year. So we're running this business more on a seasonal basis, we are laser.

Scott D. Lipesky: So yeah, we expect growth in both halves. We'll start there. We do expect the growth rate to be higher in the first half. We'll get a little bit of a help here from this 53rd week nuance on the calendar shift. And it really comes down to visibility.

Scott D. Lipesky: Corey, you know, sitting here today, we had a nice start to the quarter, a strong start to the quarter. You know, that's baked into our first quarter outlook here of up low double digits. And, you know, with how fast this world is changing, and just the geopolitical landscape changes so quickly, you know, finding it hard to be super aggressive here, and a reason to be super aggressive on the back half when sitting here in March of this year.

Corey: We're focused on running the strength the spring business has had great product reactions to the start of spring. Our teams are chasing inventory for the spring and we're building those plans for the fall.

Speaker Change: That's very helpful color. Thank you so much and best of luck. Thanks, Greg.

Unknown Executive: So we're running this business, you know, more on a seasonal basis; we are laser focused on running the spring business. The spring business has had great product reactions, you know, to the start of spring; our teams are chasing inventory for the spring. And you know, we're building those plans for the fall. Very helpful caller. Thank you so much and best of luck.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from the line of Matthew Boss with Jpmorgan. Your line is now open.

Matthew Robert Boss: Thanks, and congrats on another great quarter.

Matthew Robert Boss: Thanks, Matt.

Matthew Robert Boss: <unk>.

Matthew Robert Boss: Two questions Fran maybe near term could you elaborate on the continued momentum post holiday and what Youre seeing with early spring assortment. So far here in the first quarter and then just larger picture help us to think about the global opportunity. It seems like in the release and then some of our recent calls you've really honed in on the global.

Unknown Executive: Thanks, Corey. Thank you. One moment for our next question. Our next question comes from the line of Matthew Boss with J.P. Morgan. Your line is now open.

Unknown Executive: Thanks and congrats on another, The Bulletproof Executive 2013, So, two questions. Fran, maybe near term, could you elaborate on the continued momentum post-holiday and what you're seeing with early spring assortments so far here in the first quarter? And then, just larger picture, how best to think about the global opportunity?

Matthew Robert Boss: Opportunity. So maybe just how best to think about the growth playbook outside of North America as you see it from here one quick one for Scott is there any change in operating margin flow through this year. If sales were to come in above plan or just any offsetting investments for us to consider.

Fran Horowitz: It seems like in the release and in some of our recent calls, you've really honed in on the global opportunity. So, maybe just how best to think about the growth playbook outside of North America as you see it from here. One quick one for Scott. Is there any change in operating margin flow through this year if sales were to come in above plan, or just any offsetting investments for us? Hey Matt, good morning.

Scott D. Lipesky: Hey, Matt Good morning, So, yes, so super excited with the results, we put up obviously for the fourth quarter as well as for the full year and we did see some nice acceleration in January it really does kind of prove that you can do business in January I'm very proud of the team because that was really a result of transitioning their assortments into early spring.

Fran Horowitz: So yes, I'm super excited with the results we put up, obviously, for the fourth quarter, as well as for the full year. And we did see some nice acceleration in January; it really does kind of prove that you can do business in January. I'm very proud of the team, because that was really a result of transitioning their assortments into early spring and getting some newness on the floor. Our consumer continues to respond to newness. And having new and first is something that's a very big part of our vocabulary. And the fact that we're holding our inventory so lean, and we're chasing, it drives the ability to be able to do that. You used our word.

Scott D. Lipesky: And getting some newness on the floor or consumer continues to respond to newness and having new and first is something that's a very big part of our vocabulary and the fact that we're holding our inventory so lean and we're chasing it drives the ability to be able to do that.

Scott D. Lipesky: You used a word so yes, we are actually exporting our playbook globally. It was exciting to see both of our.

Scott D. Lipesky: International regions start to return to growth. This year that was our expectation and we're very happy to have seen that come through we've spent years building those teams in Shanghai as well as London and the fact that our playbook is working here, we're very confident that it'll work there as well I didn't actually in both regions very recently working and visiting with the teams.

Fran Horowitz: So yes, we are actually exporting our playbook globally. It was exciting to see both of our International Regions start to return to growth this year. That was our expectation, and we're very happy to have seen that come through. We've spent years building those teams in Shanghai as well as London.

Scott D. Lipesky: Exciting to see all the talent that we've been able to recruit into those offices.

Fran Horowitz: And the fact that our playbook is working here, we're very confident that it'll work there as well. I've actually been to both regions very recently, working and visiting with the teams, and it's exciting to see all the talent that we've been able to recruit into those offices. All right, man. I'll grab the last one.

Scott D. Lipesky: Alright, then I'll grab the last one on the operating margin flow through if we would see sales outperformance. It would be similar to 2023. Our investment plan is relatively set at this point any outperformance we may put more marketing and player like we did in 2023, but flow through would be similar.

Scott D. Lipesky: Yeah, on the operating margin flow through, if we would see sales outperformance, it would be similar to 2023. Our investment plan is relatively set at this point, so any outperformance, we may put more marketing in play like we did in 2023. But you know, flow through would be similar. Festival.

Speaker Change: Best of luck.

Speaker Change: Thanks.

Speaker Change: Thank you one moment for your next question.

Our next question comes from the line of Marni Shapiro with the retail tracker. Your line is now open.

Marni Shapiro: Good morning, guys, congrats on a great quarter and year one.

Marni Shapiro: One housekeeping question and one bigger picture just on the housekeeping of the stores you're opening are you leaning into abercrombie or Hollister, specifically and the store size has been getting a little bit smaller. So I'm just curious what youre thinking about store sizes for the concepts in 'twenty four.

Scott D. Lipesky: Thank you. Thank you. One moment for our next question. Our next question comes from the line of Marni Shapiro with the Retail Tracker. Your line is now open.

Unknown Executive: Good morning, guys. Congratulations on a great quarter and year. I have one housekeeping question and one bigger picture.

And then Fran if you could just talk about your ability to attract new customers into the brands have you been able to do that is it through digital are you, bringing in lapse Abercrombie shoppers I'm curious what that looks like across the brands and what it looks like for 'twenty four.

Unknown Executive: Just on the housekeeping, of the stores you're opening, are you leaning toward Abercrombie or Hollister specifically? And the store size has been getting a little bit smaller, so I'm just curious what you're thinking about store sizes for the concepts in 24. And then, Fran, if you could just talk about your ability to attract new customers into the brands. Have you been able to do that?

Fran Horowitz: Hey, Marni I'll kick this one off so on the new store. So 75, new experiences that will bring in 2024 thats up from around 57, there in 2023, and those will be tilted towards abercrombie and tilted towards the Americas will still be opening Hollister, there will still be opening stores globally, but there'll be tilted towards abercrombie, obviously with the trend that we're seeing.

Scott D. Lipesky: Is it through digital? Are you bringing in lapsed Abercrombie shoppers? I'm curious what that looks like across the brands and what it looks like for 24. Hey, Marni, I'll kick this one off.

Scott D. Lipesky: So on the new stores, so the 75 new experiences that we'll bring in in 2024, that's up from around 57 there in 2023, those will be tilted towards Abercrombie and tilted towards the Americas. We'll still be opening Hollister stores, and we'll still be opening stores globally, but they'll be tilted towards Abercrombie, obviously, with the trend that we're seeing. When you think about store sizes for 2024, you know, kind of different here, you know, by brand. The Hollister brand, we're liking the sizes there; we're talking 5,000, 6,000 square feet. For Abercrombie, you know, it kind of depends. Now that we're getting into the neighborhood retail environment, you know, it depends on what you can find and what deal you can get. So we're seeing those stores somewhere between 2,500 square feet and 4,000. And in malls, you know, we're kind of in that 4,000 or 5,000 square foot range.

Speaker Change: And when you think about store sizes for 2024 different here by brand. The Hollister brand. We're liking the sizes. There we're talking five 6000 square feet for Abercrombie it kind of depends now that we're getting into the neighborhood.

Speaker Change: Retail environment it depends on which you can find in with deal you can get so we're seeing those stores somewhere between 25 to 100 square feet to 4000 and in malls, we're kind of in that four to 5000 square foot range. So very happy with those those spaces and we hope to get more of them in 2024 great.

Speaker Change: And regarding your other question regarding attracting customers. So yes, we are attracting new customers actually added millions of customers to our file this year, which is an incredibly exciting those are both customers coming back to the brand as well as new customers that are just discovering us it's being done through digital as well as stores and the fact that we have really expanded the addressable market.

Speaker Change: And age as well as in categories is really helping us bring in some some new shoppers. Great example would be they come to check out <unk>.

Scott D. Lipesky: So very happy with those, those spaces, and we hope to get more of them in 2024. Great. And regarding your other question regarding attracting customers, so yes, we are attracting new customers. We actually added millions of customers to our database this year, which has been incredibly exciting. Those are both customers coming back to the brand as well as new customers that are just discovering us. It's being done through digital as well as in stores. And the fact that we have really expanded the addressable market in age as well as in categories is really helping us bring in some new shoppers. A great example would be that they come to check out YPB, and then they realize and see many other things on the site that they're excited about, and we see the attachment to the other products as well.

Speaker Change: And then they realize that many other things on our side that they're excited about and we see the attachment to the other products as well.

Speaker Change: Great Congratulations guys. Thank you.

Speaker Change: Thank you.

Speaker Change: And our next question comes from the line of Alex Jackson with Morgan Stanley. Your line is now open.

Alex Jackson: Great. Thanks, so much for taking the question and congrats on a great quarter just two for me first on Hollister.

Alex Jackson: That banner sit now as it relates to profitability is it still undershooting historical levels.

Alex Jackson: If so what's holding it back and how do you think about the timeline and then just turning to E&S digital penetration can you just remind me why it's so much higher than the average retailer has it always been that way or was that a part of the turnaround over the last few years.

Fran Horowitz: Great. Congratulations, guys. Thank you. And our next question comes from the line of Alex Stratton with Morgan Stanley. Your line is now open.

Speaker Change: Thanks, Joe.

Speaker Change: Luckily answer those questions in reverse I'll start with Abercrombie.

Joe: Consumer really as a result of the age cohort that we've gone after the millennial consumer is really a online shopper and they love the convenience of coming to a store whether that the pick up there what we call a pop and purchase online pickup in store or to make an exchange or a return.

Unknown Executive: Great. Thanks so much for taking the question and congrats on a great quarter. Just two from me.

Unknown Executive: First on Hollister, where does that banner sit now as it relates to profitability? Is it still undershooting historical levels? And maybe, if so, what's holding it back, and what do you think about the timeline?

Joe: Digital penetration has certainly grown significantly over the past several years as we have.

Unknown Executive: And then just turning to A&F, digital penetration. Can you just remind me why it's so much higher than the average retailer? Has it always been that way?

Joe: Change that brands are significantly the Hollister team starts their journey on their phone as well, but it is very social for them to spend time with them other friends and complete their purchase there.

Fran Horowitz: Or was that a part of the turnaround over the last few years? Thanks. So, hey Alex, we'll actually answer those questions in reverse. We'll start with Abercrombie. The digital consumer really is a result of the age cohort that we've gone after. So the A&F millennial consumer is really an online shopper, and they love the convenience of coming to a store, whether that's to pick up their, what we call a pop-in, purchase online, pick up in store, or to make an exchange or a return. The digital penetration has certainly grown significantly over the past several years, as we have seen on www.dana.telsey.com. Hey, Alex, I'll grab the Hollister question. I'm so happy with the profitability of the Hollister brand. And it's been a roller coaster here over the past few years with COVID.

Speaker Change: Hey, Alex I'll grab the Hollister question, so happy with the profitability of the Hollister brand I mean, it's been a rollercoaster here over the past few years with Covid.

Alex Jackson: One and then the the spike in input costs had an outsized impact on Hollister, but we're through the worst of that in terms of cotton in terms of freight and so we've seen the profitability of Hollister dramatically improve here as we've come through 2023. When you look at the brand store fleet like come on operational basis. The store fleet is in a good place our productivity.

Alex Jackson: <unk> in the stores is up in the gross margins are in a really good place also we're selling a lot less clearance in hollister than we were last year number one whenever the business step back I'm, sorry, 2022, and compared to 2019. So it's just a cleaner selling environment. There in Hollister. Our teams are chasing we've mentioned that and optimistic for the profitability of.

Scott D. Lipesky: Number one, and then the spike in input costs had an outsized impact on Hollister, but we're through the worst of that in terms of cotton and freight. And so we've seen the profitability of Hollister dramatically improve here as we've come through 2023. When you look at the brand, you know, the store fleet, like on an operational basis, the store fleet is in a good place, or productivity in the store is up, and the gross margins are in a really good place. Also, you know, we're selling a lot less clearance in Hollister than we were last year, number one, whenever the business steps back, I'm sorry, 2022, and compared to 2019. So it's just a cleaner selling environment there in Hollister; our teams are chasing, we've mentioned that, and optimistic about the profitability of Hollister to continue as we go forward. Thanks a lot.

Alex Jackson: Hollister to continue as we go forward.

Speaker Change: Thanks, a lot good luck thanks.

Speaker Change: Thanks.

Speaker Change: Thank you.

Speaker Change: And our next question comes from the line of Maury CEO Serna with UBS. Your line is now open.

Speaker Change: Great. Good morning, and thanks for taking our questions I guess I just wanted to see.

Speaker Change: For more details about.

How youre thinking about the growth coming in.

Speaker Change: And both brands I know you mentioned, you expect abercrombie to outperform Hollister.

Speaker Change: We expect the same kind of divergence in sales growth between both brands or does that narrow this year.

Speaker Change: <unk>.

Speaker Change: Thing with international versus versus the U S.

Unknown Executive: Good luck. Thank you. And our next question comes from the line of Mauricio Serna with UBS. Your line is now open. Great. Good morning, and thanks for taking our questions.

Speaker Change: And then maybe on the inventory ended up the year in pretty good shape as well despite the very strong growth.

Unknown Executive: I guess I just wanted to hear more details about, you know, how you're thinking about the growth coming in both brands. I know you mentioned you expect Abercrombie to outperform Hollister. I mean, should we expect the same kind of divergence in sales growth between both brands, or could that narrow this year?

Speaker Change: What are your expectations for inventory growth.

Speaker Change: This year.

Speaker Change: Relative to sales growth. Thank you.

Speaker Change: Yeah, Hey, Mark to actually we're going to take care of that.

Speaker Change: <unk> wealth regarding inventory, yes, very pleased to start the year with down 7% inventory and obviously a little bit differentiated by by brand, but we've spent a lot of years getting our inventory into a much healthier place and our expectation is that it will probably be closer to ours.

Unknown Executive: And same thing with international versus U.S. And then maybe on the inventory, it ended the year in pretty good shape as well, despite, you know, the very strong growth. I mean, what are your expectations for inventory growth this year? www.thevenusproject.com, Yeah, hi Mauricio.

Speaker Change: Our sales opportunity as we head into 2024, but we are going to stay lean were going to continue to chase that work with the teams every single week on what's working and what's not working.

Fran Horowitz: Actually, we're going to take yours back. We're going to go in reverse as well. So regarding inventory, yeah, very pleased to start the year with a down 7% inventory and, obviously, a little bit differentiated by brand. But we've spent a lot of years getting our inventory into a much healthier place. And our expectation is that it will probably be closer to our sales opportunity as we head into 2024. But we are going to stay lean. We are going to continue to chase them. We work with the teams every single week on what's working and what's not working. And that mantra is not changing in 2024. And Mauricio, I'll grab the other two.

Speaker Change: And that mantra is not changing in 2024 and <unk> grabbed the other two so growth levels by brand, yes, we've obviously seen abercrombie outperform our hollister brands here over the past few years and we're just going to expect that to continue until it doesn't there could be divergence at some point and.

Speaker Change: And when that happens fine but.

Speaker Change: We're worried about growing the total same thing for international versus U S growth.

Speaker Change: U S business, it's a little bit over 80% of the business at this point, we've seen really strong growth in the U S. Over the past few years and so we will expect the majority of dollar growth to continue to come from the Americas region, but on a rate basis. We're optimistic that we can start to see good growth outsized growth in Europe, and APAC, obviously APAC is a very small part of our biz.

Fran Horowitz: So growth levels by brand. Yeah, we've obviously seen Abercrombie outperform Hollister Brands here over the past few years. And we're just going to expect that to continue until it doesn't. You know, there could be divergence at some point. And when that happens, fine.

Speaker Change: But as Fran mentioned earlier, we are investing in our teams and we're rebuilding the foundation and we're confident in our ability to grow in those regions.

Scott D. Lipesky: But, you know, we're worried about growing the total. The same thing applies for international versus U.S. growth. You know, the U.S. business is a little bit over 80% of the business at this point. We've seen really strong growth in the U.S. over the past few years. And so we'll expect the majority of dollar growth to continue to come from the Americas region. But, you know, on a rate basis, we're optimistic that we can start to see good growth, outsized growth in Europe and APAC. Obviously, APAC is a very small part of our business.

Speaker Change: Got it Super helpful. Just one quick follow up on the Opex on the fourth quarter any way you could parse out or pointed out like how much did.

Speaker Change: Additional we contribute to the opex growth in Q4.

Speaker Change: Yes, it was about $25 million or so for the for the fourth quarter So that will.

Speaker Change: <unk> heard us a little bit there in Q4, but that'll that'll go away in 2024.

Speaker Change: Got it thanks, so much and good luck.

Speaker Change: Okay.

Speaker Change: Thank you one moment for our next question. Please.

Scott D. Lipesky: But as Fran mentioned earlier, you know, we're investing in our teams, and we're rebuilding the foundation, and we're confident in our ability to grow in those regions. Got super helpful. Just one quick follow up on the OPEX for the fourth quarter. Anyway, you could like parse out or point out like how much did the additional week contribute to the OPEX growth in Q4. Yeah, it was about 25 million or so for the fourth quarter.

Speaker Change: And our next question comes from the line of Paul <unk> with Citi. Your line is now open.

Speaker Change: Hi, This is Kelly on for Paul Thanks for taking my question and congrats on a great quarter.

Kelly: I wanted to touch on the gross margin expansion, you're expecting in that 24 in <unk> how much of a benefit are you expecting continued from lower product costs and is that a tailwind that loss.

Scott D. Lipesky: So that'll, you know, hurt us a little bit there in Q4, but that'll go away in 2024. Got it. Thank you. Thank you so much. Thank you. One moment for our next question, please. And our next question comes from the line of Paul Lejuez with City. Your line is now open. Hi, this is Kelly on behalf of Paul.

Kelly: Throughout the year.

Speaker Change: Secondly, Frank could you talk about what learnings do you feel youre taking for me.

Frank: And apply to Hollister.

Frank: Have you seen progress there and just remind us of how much either up at Hollister versus 2018.

Frank: Hi, Kelly I'll kick this one off so let's start with gross margin expansion, yes, we will see benefit from the cotton costs Thats, mainly a front half phenomenon here in 2024.

Unknown Executive: Thanks for taking our question and congratulations on a great quarter. I just wanted to touch on the gross margin expansion you're expecting in F24 and 1Q. How much of a benefit are you expecting to see from lower product costs? And is that a tailwind that lasts throughout the year?

Frank: Q1, we talked about operating margins in that 8% to 10% range on our outlook.

Frank: About doubled from $4 six last year primary driver should be that gross margin. Our gross profit rate expansion. So excited to see finally get to the point, where we're seeing those lower product cost come through the P&L and.

Unknown Executive: And then secondly, Frank, could you talk about what learnings you feel you're taking from A&F and applying to Hollister, where you've seen progress there? And just remind us of how much AURs are up at Hollister versus 2019. Thank you.

Frank: The France in the next year.

Frank: So the learnings from and after we have a corporate playbook that we referenced is often which is aligning our product our voice and experience and really staying close to our customer.

Scott D. Lipesky: So let's start with gross margin expansion. Yeah, we'll see benefit from the cotton cost, but that's mainly a front half phenomenon here in 2024.

Frank: Same principles that we use for each of the brands.

Frank: And particularly for Hollister this year, I mean, keeping that lean inventory and making sure that we stay in chase mode has been a huge win for us and intending to do the same as we continue into 2024, and then lastly, marketing we treat our marketing very similarly to how we treat our our chase and our open to buy and we keep our we keep up keep it open so that we can continue to.

Scott D. Lipesky: You know, Q1, we talked about operating margins in that 8 to 10% range on our outlook, about double from 4.6 last year. The primary driver should be that gross margin or gross profit rate expansion. So excited to finally get to the point where we're seeing those lower product costs come through the P&L. And I'll kick it to Fran for the next.

Frank: Test and learn and see what's working we were able to add some marketing to hollister in the back half when we had the product all lined up and the customer with responding.

Fran Horowitz: Yeah, so the learnings from A&F, you know, we have a corporate playbook that we reference very often, which is aligning our product or voice and experience and really staying close to our customers. Those are the same principles that we use for each of the brands. And particularly for Hollister this year, I mean, keeping that lean inventory and making sure that we stay in chase mode has been a huge win for us, and we intend to do the same as we continue into 2024. And then lastly, you know, marketing. We treat our marketing very similarly to how we treat our chase and are open to buy, and we keep it open so that we can continue to test and learn and see what's working. We were able to add some marketing to Hollister in the back half when we had the product all lined up, and the customer was responding.

Frank: On the last piece in terms of AUR as we think about Hollister versus Abercrombie.

Frank: The path for Hollister definitely up double digits versus 2019, lower clearance spending are low and slower clearance selling we've taken off some promotions versus 2019, so really a cleaner healthier sales base. There. When you think about Abercrombie, it's kind of an all of the above scenario. The brand is very different than it was in.

2019, and 2018, so we have a very different product mix with the strength of the product the marketing and the brand we've been able to take off a significant amount of promotions versus 2019 and prior so very happy with where those AUR is are we like to say that the customer votes every day with their wallet. So we will continue to try to deliver great quality for the consumer going forward.

Scott D. Lipesky: On the last piece, in terms of AURs, as we think about Hollister versus Abercrombie, you know, the path for Hollister is definitely up double digits versus 2019, you know, lower clearance spending or lower clearance selling. We've taken off some promotions versus 2019, so really, a cleaner, healthier sales base there. When you think about Abercrombie, it's kind of an all of the above scenario.

Frank: <unk>.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for our next question. Please.

Speaker Change: Our next question comes from the line of Janet Kloppenburg with J J J K Research Associates. Your line is now open.

Janet Joseph Kloppenburg: Hi, Thanks, so much and congrats on a good quarter and Fabulous year.

Unknown Executive: The brand is very different than it was in 2019 and 2018, so we have a very different product mix. With the strength of the product, the marketing, and the brand, we've been able to take off a significant amount of promotions versus 2019 and prior, and I'm very happy with where those AURs are. We like to say that the customer votes every day with their wallet, so we'll continue to try to deliver great quality for the consumer going forward. www.larryweaver.com Thank you.

Janet Joseph Kloppenburg: Plan.

Janet Joseph Kloppenburg: I was wondering.

Janet Joseph Kloppenburg: The bottoms business, especially when you call out Hollister being so strong I was wondering if the components of that were changing because that assess the denim category is coming is coming back I was wondering what you are seeing there and.

Janet Joseph Kloppenburg: Hope you would give us an update on your outlook for promotional activity.

Janet Joseph Kloppenburg: Embedded in guidance.

Janet Joseph Kloppenburg: Because you guys were so much less promotional year over year last year and I'm wondering if you think that can continue.

Janet Joseph Kloppenburg: And.

Unknown Executive: One moment for our next question, please. Our next question comes from the line of Janet Kloppenburg with JJK Research Associates. Your line is now open.

Janet Joseph Kloppenburg: And Scott on the gross margin opportunity.

Janet Joseph Kloppenburg: You talked about earnings.

Janet Joseph Kloppenburg: Perhaps.

Janet Joseph Kloppenburg: In the first half versus the second half for obvious reasons and that's how we should think about gross margin as well.

Unknown Executive: Hi, thanks so much and congrats on a good quarter and a fabulous year. Fran, you said the bottoms business, especially when you called out Hollister's being so strong, I was wondering if the components of that were changing, because I sense the denim category is coming back, so I was wondering what you were seeing there, and I hoped you would give us an update on your outlook for promotional activity, you know, embedded in, because you guys were so much less promotional year-over-year last year, and I'm wondering And Scott, on the gross margin opportunity, you talked about earnings being perhaps higher in the first half versus the second half for obvious reasons, and that's how we should think about gross margin as well. Here's my question.

Speaker Change: This is my question. Thanks.

Scott D. Lipesky: Let's start with the product. So if we talk about bottoms bottoms has actually been a success across both brands and all genders I think the biggest learning coming out of 2022 was certainly about diversifying on our bottoms business. So that we're not so heavily reliant on just the denim now with that said denim is working there are some exciting new things happening in denim, it's certainly clean.

Scott D. Lipesky: Up believe it or not the right now is starting to go back down the wide lagging. The baggy is working both in men's and women's and girls and boys, but the real key here is keeping a balance in our bottoms assortment, making sure that we continue to mine for new things out there like utility and cargo and non denim bottoms, which is which are working for us.

Fran Horowitz: Thanks. Let's start with the product. So if we talk about Bottoms, Bottoms has actually been a success across both brands and all genders. I think the biggest learning coming out of 2022 was certainly about diversifying our Bottoms business so that we're not so heavily reliant on just the denim. Now with that said, denim is working.

Speaker Change: Now I'll move to the next to Janet So promo outlook. We start every year, assuming that we're going to be as promotional as the prior year and our goal will be then to pull some back as we go throughout the year and that kind of ties to that mindset of assuming flat AUR year over year at the beginning here as.

Fran Horowitz: There are some exciting new things happening in denim. It's certainly cleaning up, believe it or not. The rise is now starting to go back down. The wide leg and the baggy are working both in men's and women's and girls' and boys'.

Speaker Change: As we said that the customer will continue to vote. If they are willing to pay a little bit more than last year and if the product acceptance is there and the inventories in the right place that will enable us hopefully to pull off some promotions as we go throughout the year. The gross margin point versus sales, yes, very similar first half benefit mainly from cotton. So gross margin expansion a little more in the first half there than you see in the <unk>.

Fran Horowitz: But the real key here is keeping a balance in the Bottoms assortment and making sure that we continue to mine for new things out there like utility and cargo and non-denim Bottoms, which are working for us. I'll move to the next two, Janet. So, promotion outlook, you know, we start every year assuming that we're going to be as promotional as the prior year, and our goal will then be to pull some back as we go throughout the year. And that kind of ties to that mindset of assuming flat AUR year over year at the beginning of the year.

Speaker Change: Half.

Speaker Change: Thanks, so much.

Speaker Change: Thank you. Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from the line of Dylan Carden.

Scott D. Lipesky: As we said, the customer will continue to vote if they're willing to pay a little bit more than last year, and if the product acceptance is there and the inventory is in the right place, that will enable us, hopefully, to pull off some promotions as we go throughout the year. The gross margin point versus sales, yeah, very similar, you know, first half benefit mainly from cotton, so gross margin expansion is a little more in the first half than you see in the second half. Thanks so much.

Dylan Douglas Carden: Your line is now open.

Dylan Douglas Carden: Okay.

Dylan Douglas Carden: Yeah.

Just kind of curious here.

Dylan Douglas Carden: I think you even said this on your prepared remarks, you have hit or exceeded that sort of 2025.

Dylan Douglas Carden: <unk> targets and so from here I guess, maybe it's 5 billion is the right way to kind of think about it I guess is growth no.

Dylan Douglas Carden: Our larger customer file for Abercrombie Hollister recovery net store growth international onshore used a combination of all but if you could kind of maybe wait those and then the structural improvement in sort of the long marten target.

Scott D. Lipesky: Thank you. Thank you. One moment for our next question. Our next question comes from the line of Dylan Carden. Your line is now open. All right, just kind of curious here.

Dylan Douglas Carden: Sustaining 12%.

Dylan Douglas Carden: Whats.

Unknown Executive: You know, I think you've said this in your prepared remarks, but you've hit or exceeded the sort of 2025 targets. And so from here, I guess maybe 5 billion is the right way to kind of think about it. I guess that is growth now. A larger customer file for Abercrombie, Hollister Recovery, Net Store Grows International, I'm sure you're gonna say the combination of all, but if you could kind of maybe weigh those,

What sustains that sort of a new level kind of going back to some of the original thoughts around closing the benefits there.

Dylan Douglas Carden: The recovery of the business. Thanks.

Speaker Change: Well, John John Yes.

Speaker Change: That does sum up our <unk> plan and our targets thinking about $5 billion is the right way to think about it very excited to achieve but we have topline and bottomline, but the key that we set in June of 2022, and we came out with our always forward plan was about sustainable profitable consistent growth and that's really what our goal is for 2010.

Fran Horowitz: And then the structural improvement in sort of the long-term margin target, sustaining 12%. You know, what sustains that is sort of a new level, kind of going back to some of the original thoughts around closing the benefits there and any recovery of the business. Thanks. Well done, Dylan.

Speaker Change: For it is certainly too long to do it again I always say that there is no finish line and we're really just at the beginning of this conversation, particularly from a global perspective. They are just so many opportunities out there and having seen both those regions go positive this year and as I mentioned, just a minute ago about the teams that were building in those regions. So super excited about exploring.

Fran Horowitz: That does sum up our Always Forward plan and our targets; thinking about five billion is the right way to think about it. You know, very excited to achieve what we have on the top line and bottom line. But the key that we said in June of 2022 when we came out with our Always Forward plan was about sustainable, profitable, consistent growth. And that's really what our goal is for 2024, to do it again. I always say that there is no finish line.

Speaker Change: Our playbook.

Speaker Change: John on the second part in these long term targets and the sustainability you called out the <unk> square footage in the real estate some of the stats I gave square footage out 21% occupancy down 24% productivity up 18%. That's a much healthier store base than we had in 2019, when we were in kind of those low single digits.

Fran Horowitz: And we are really just at the beginning of this conversation, particularly from a global perspective. And there are just so many opportunities out there. And having seen both those regions go positive this year, as I mentioned just a minute ago about the teams that we're building in those regions. So, super excited about exploring our playbook.

Speaker Change: The mid single digits operating margins you add on the fact that the company is now about 45% digital penetration that comes along with with variable expenses. So we just have a cleaner expense base at the company and we have regions that are growing brands that are growing and our marketing machine thats using data and analytics like they never had before and new <unk>.

Fran Horowitz: Dylan, on the second part of these long-term targets and the sustainability, you called out, you know, the pro square footage and the real estate. Some of the stats I gave, square footage down 21%, occupancy down 24%, productivity up 18%, that's a much healthier store base than we had in 2019 when we were in kind of those low single digits, maybe the mid single digit operating margins. You add on the fact that the company is now about 45% digital penetration, and you know, that comes along with variable expenses. So we just have a cleaner expense base at the company, and we have regions that are growing, brands that are growing, and a marketing machine that's using data and analytics like they never have before, and new technologies. So that gives us the excitement, like Fran said, that we can continue to grow and, you know, sustain these margins where they are growing. Is the online penetration there around 45%? Does that do you anticipate that being relatively stable from here? Is that kind of the right level?

Speaker Change: <unk>, so that gives us the excitement like France that we can continue to grow and sustain these margins where they are grow.

Speaker Change: As the online penetration there around 45% is that do you anticipate that being relatively stable from here does that kind of the right level.

Speaker Change: It feels like it's stable Abercrombie is a brand that's around 60% digital in Hollister is a brand that's around 30% digital they've been tracking at those numbers over the past couple of years. So it will it tick up a couple hundred basis points, one way or another it may be but that's how we're running the business, we're making huge investments in digital and.

Speaker Change: We're also making huge investments in stores and in the customer demands. It all so I'm Super happy with all the products progress we've made but also all the operations.

Scott D. Lipesky: It feels like it's stable. You know, Abercrombie is a brand that's around 60% digital, and Hollister is a brand that's around 30% digital. They've been tracking those numbers over the past couple of years. So will it tick up a couple of hundred basis points one way or another?

Speaker Change: <unk>, we've made when it comes to the customer experience through this digital revolution of past couple of years.

Speaker Change: And the Hollister store count.

Scott D. Lipesky: Maybe, but that's how we're running the business. We're making huge investments in digital, and we're also making huge investments in stores, and the customer demands it all. So I'm super happy with all the products, progress we've made, but also all the operations improvements we've made when it comes to the customer experience through this digital revolution in the past couple of years. And the Hollister store count, you know; you're in a net square footage or at least a net store open position. Does Hollister need to kind of close more stores here? How do you feel about the size of that fleet and sort of the penetration rate? I'm happy with the side of the fleet. Probably there's an opportunity to open more stores for Hollister, you know, in the Hollister markets. We're always repositioning that brand within cities, you know, malls move around, you know, the hotspots move around, we're always doing that. So we're always repositioning our brands within key cities, but we do believe there's an opportunity to grow the Hollister base.

Speaker Change: You are in a net square footage or at least the net store opening position Hollister need to kind of close more stores here. How are you feeling about the size of that fleet and sort of the penetration rate.

Speaker Change: Happy with the size of the fleet, probably there is an opportunity to open more stores for Hollister and the Hollister markets. We're always repositioning that brand within cities in your malls move around the hotspots move around we're always doing that so we're always repositioning our brands within key cities, but we do believe there is an opportunity to grow the Hollister base.

Speaker Change: Global economy.

Speaker Change: Alright, and local and international.

Speaker Change: I get that back to prior 30 plus percent do you think at this point.

Speaker Change: That would be the goal we expect growth in all regions. This year, so we'd love to be growing the Americas, but also growing the international business and we will see where the penetration ends up.

Speaker Change: Thanks, Dan.

Dan: Okay. Thanks.

Dan: You.

Speaker Change: This concludes our Q&A portion.

Scott D. Lipesky: Globally. Sorry, and last one. International penetration. Can I get that back to prior 30 plus percent, do you think, at this point? That would be the goal. We expect growth in all regions this year, so we'd love to be growing the Americas but also growing the international business, and we'll see where the penetration ends up.

Speaker Change: Like to turn the call back over to Fran Horowitz for closing remarks.

Fran Horowitz: Thank you everyone for joining the call today, and we look forward to continuing to provide updates in the near term. Thank you.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.

Scott D. Lipesky: Awesome. Thanks guys. Thank you. This completes our Q&A portion. I would like to turn the call back over to Fran Horowitz for closing remarks. I just want to say thank you everyone for joining the call today and we look forward to continuing to provide updates in the near term. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day, www.ukuleleroadtrips

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