This summary is based on the third quarter fiscal 2007 earnings call conducted by Abercrombie & Fitch Co. (ANF: chart) on November 21, 2007.

Chief Financial Officer: Mike Kramer
VP of Finance: Mike Nuzzo
CC: Tom Lennox

Key Investors Issues

- The earnings per share rose to $1.29 as against $1.11 per share in the prior year.
- Quarterly revenue grew 13% over last year to $973.9 million.
- During Q3, the company purchased about 2.6 million shares for $208.9 million.
- The company plans capital expenditures for fiscal 2007 to be between $395 million and $405 million.

Third Quarter Fiscal 2007 Financial Highlights

Third quarter net sales increased 13% to $973.9 million from $863.4 million in the prior year quarter.

- Third quarter direct-to-consumer net sales increased 48% to $61.3 million for the 13-week period, ended November 3, 2007.
- Total company comparable store sales increased 1%.
- Transactions per store per week increased 3% and average transaction value was flat for the 13 weeks ended November 3, 2007, compared to the 13 weeks ended November 4, 2006.
- Regionally same store sales were strongest in the Northeast, Canada and in the tax-free impacted states Florida and Texas. The comparable store sales were weakest in the West and Midwest regions.

Third quarter gross profit rate was 66.2%, up 40 basis points compared to last year.

The change in rate is attributed to a higher initial markup rate and a lower merchandise shrink rate, partially offset by a higher markdown rate versus last year. As in the second quarter, the strong fashion tops business contributed to both a higher overall IMU, and a higher overall markdown rate.

The firm ended the third quarter with inventories down 15% per gross square foot at cost versus last year.

This is consistent with the guidance provided on the second quarter earnings call. This result is attributed to owning lower levels of basic inventory compared with last year.

Stores and distribution expense for the quarter, as a percentage of sales, increased 80 basis points to 36.5% versus 35.7% last year.

The increase in rate is partially attributed to store payroll, specifically the effect of minimum wage and management salary level increases at a higher direct and store packaging expense rate.

Direct-to-consumer order processing expenses were also higher as a percentage of sales compared with last year since the firm’s DTC sales growth rate exceeded the total company sales growth rate.

The distribution center UPH increased 13% in the quarter, reflecting greater efficiencies in the operation of our second DC.

For the third quarter, marketing, general and administrative expenses, as a percentage of sales, decreased 60 basis points to 10.7% from 11.3% last year. The reduction in rate versus last year resulted from savings in travel, consulting, legal, and in-store marketing expense rate.

For the third quarter, operating income increased 15% from $162.8 million last year to $186.6 million this year.

The operating income rate, as a percent of sales, was 19.2% compared to 18.9% for the third quarter of last year.

Net income for the third quarter increased 15% to $117.6 million, from $102 million last year. Third quarter net income per diluted share increased 16% to $1.29 from $1.11 last year.

- The company generated approximately $261 million in net cash flow from operations in the third quarter, a 39% increase over third quarter of last year.
- The effective tax rate for the third quarter was 38.5%, compared with 38.6% for the third quarter last year.