Team 1 Benjamin Scheick Anthony Bisnath Billy Hussa Nicole Newman

1. Team 1 Benjamin Scheick Anthony Bisnath Billy Hussa Nicole Newman

2. Mission Statement • Tries to attract the best executive management and associates. • Seeks to maintain high level of performance and serve the best interests of stockholders and the company. • Gives associates very desirable stock options in order to offer incentive for maximum effort. • The brand name is a mark of quality for Abercrombie. • Provides endless growth opportunities • Attracts people to the website and heightens profit margins • Lessens risk and promotes innovation

3. Business Description • 1892 – David Abercrombie purchases small waterfront factory in NYC • Teams up with Ezra Fitch to establish a manufacturing company that could provide the highest quality camping supplies. • June 26, 1996 – Abercrombie and Fitch Corporation re-established. • October 1, 1996- IPO • Still the same fundamental concept at the root of Abercrombie and Fitch, Co. • Dedicated to providing high-quality merchandise that captures “Classic American Lifestyle.”

4. Business Description • ANF Market Cap. = $2.93 billion • Retail Industry Cap.= $66 billion • ANF Current Stock Value = $29.61 • 52 week low = $16.21 • 52 week high = $47.50

5. SWOT Analysis

6. Anticipation of Consumer Demand and Style Preferences Superior Customer Service and Product Quality Competitive Pricing Strategy Fully Utilize Internet capabilities Minimize Inventory Minimize Lead Time in Production Process Broaden Reach of Target Customer Advertise Critical Success Factors

7. Customer Analysis • Customer value proposition at Abercrombie & Fitch = to provide the highest quality merchandise with the most helpful customer service in the quickest time possible. • Labels highlight the “Authentic Brand”, “Quality Guaranteed”, “Manufactured with the finest materials available,” and the year in which they were established, 1892. • stresses the longevity of the product and company, and alludes to the fact that their products have endured the scrutiny of time, emphasizing the quality that they promise to the customers.

8. Customer Analysis • Some important market trends that should be looked at when deciding what items of clothing to be put on the shelves would be the time of year, or season. • Customer Metrics: • Time it takes to complete purchase • Proportion of customers who actually purchase an item. • Turnover of fashions • Number of returns

9. Competition • Target market is 17 – 22 age group. • Carved niche in the casual/ sporting goods industry. • Threats by rivals with new products/ trends. Inherent that current style intertwined with quality is maintained. • Competitive advantage from brand loyalty; 1892.

10. Competition • E-commerce experience: online change rooms; easy checkout. • Located among high end trendy stores, in high traffic areas with other designer stores. • Most important competitors are: The Gap, American Eagle, Aeropostale, Eddie Bauer, A/X.

11. Environmental Factors • Consumer Product Safety Commission(CPSC) fire-safety guidelines. • Primarily children’s sleepwear, but encompasses all textile goods. • Standard for the Flammability of Clothing Textiles: consumer awareness. • Against baggy, cotton sleepwear. • Promotes tighter-fitting flame retardant pajamas available today. • Concerns Abercrombie's children’s store that sells sleepwear. • Seriousness peaked pending over 20 recalls for flammable textiles in 1994.

12. Environmental Factors • World Trade Organization (WTO) and regulatory measures. • Governs tariffs and quotas regarding both imports and exports. • Textiles encompass a large portion of goods being traded with foreign partners. • U.S.-Canada Free Trade Agreement (CFTA) • mid 1990’s • Increases U.S. imports and exports • 1993-1997 imports of textiles increased by 5% and exports by 7% • Stimulated U.S. economy as well as the textile industry and Abercrombie. • Optimal Opportunity Cost, benefits all parties.

13. Environmental Factors • September 11th attacks on WTC • Middle East is a major source for textile raw materials. • Pakistan is requesting reduced tariffs on exports to the U.S. pending American firms’ refusal to purchase their goods. • This is a definite factor on production and pricing for Abercrombie and Fitch. • Negative effects on U.S. and Abercrombie • Reduced Consumer Confidence • Recession leads to a reduction in spending • Consumers hesitant to purchase Abercrombie’s high-cost products

14. Valuation Ratios

15. Growth Rates

16. Financial Strength

17. Profitability Ratios

18. Efficiency

19. Management Effectiveness

20. Financial Drivers • Sales Growth ratio: 56%, decreasing 10.3%. • Optimal number of store locations. Extent of expansion done. • expectations of a rise in Sales Growth: increased consumer confidence; recovery post-September 11th;end of recession. • Inventory Turnover: expect sales to rise (due to consumer confidence and rise in the Cost of Goods Sold, and Inventory. • Accounts Receivable Turnover: A&F owns the retail outlets, AR is very low.

21. Financial Drivers • Return on Sales: Return on Sales increases because Fixed Costs will remain the same since expansion is over. Expenses decrease, allowing Income to rise. Sales will also rise, but not more proportionately than Income. • Accounts Payable turnover: Increase. Facilitated by an increase in manufacturing, and acquisition of new materials. • Fixed Assets may not increase in the coming years, since e acquisition of new locations for stores and offices, and finally deciding on a strategy.

22. Financial Drivers • Long Term Debt: increase debt unlikely, due to completed expansions, and recent IPO. Used capital from company, and reinvested, to avoid paying interest on the loans.

23. Conclusions • Two Contrasts • Declining Sales Growth Rate and Low P/E Ratio indicate below average growth potential for future • High ROE and ROI indicate a positive investment opportunity

24. Conclusions • Analyst Estimates: • Increasing Positive Growth for EPS • Declining Positive Growth for Sales • 19 of 26 Analysts give buy or strong buy recommendations • Our Estimates: • Higher consumer confidence in future = increase in spending and investment • Abercrombie expansion efforts = positive future sales growth • Our Conclusion: Abercrombie and Fitch = solid investment for future