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Abercrombie & Fitch Co. – Case Study
Permanent accounts
9 Asset T-accountsCash and Equivalents(BB) 42,667(3) 800,000
(6) 514,114
(5) 13,398 (8) 50,000 (7) 23,785 (10) 908
(11)
151,264(EB)
163,564
Accounts Receivable(BB) 1695(3) 15,804
13,398 (5)
4,101
Inventories(BB) 33927(1) 481,918
465,000 (4)
6,853 (12) (EB) 43, 992
Store Supplies(BB) 5,592(2) 1,000
705 (13)
(EB) 5,887
Receivable from Limited.
(BB) 23785
23,785 (7)
(EB) 0
Other Current Assets(BB) 1296(11) 400
1,005 (14)
(EB) 691
Property and
Equipment, Net(BB) 70,517(9) 39,987
20,946
(15) (EB) 89,558
Deferred Income Taxes(BB) 3,759
(11) 6,978
(EB) 10,737
Other Assets(BB) 0
(11) 631
(EB) 631
*Note: (EB) – Ending balance, (BB) – Beginning balance
9 Liability and Owners’ Equity T-accountsAccounts Payable
15,968 (BB)(6) 514,114 481,918 (1)
1,000 (2)
39,987 (9)
(EB) 24,759
Accrued Expenses 35143 (BB) 25,054 (11) 3,685 (16)
63,882 (EB)
Income Taxes Payable
15,851 (BB) 17,736 (11) 33,587 (EB)
Long-term Debt
50,000 (BB)
(8) 50,000 (EB) 0
Other Long-term Liabilities
7,501 (BB) 3,327 (11) (EB) 10,828
Common Stock 511 (BB) 6 (11) 517 (EB)
Paid-In Capital 117,972 (BB) 26,170 (11) 144,142 (EB)
Retained Earnings(BB) 58,931
(EB) 58,931
Treasury Stock(BB) 777
(10) 908
(EB) 1,685
Temporary Accounts
5 T-accountsSales
(BB) 0 815,804 (3) (EB) 815,804
COGS(BB) 0(4) 465,000(12) 6,853 (EB) 471, 853
Income Tax Expense(BB) 0
(11) 68,040
(EB) 68,040
Interest Income (BB) 0 (11) 3,144 (EB) 3,144
G,A&SO Expenses(BB) 0(11) 150,652(13) 705(14) 1,005(15) 20,946(16) 3,685 (EB)176993
Unadjusted Trial BalanceAbercrombie and Fitch Co.
For Date Ending January 30th, 1999
Debits CreditsCash 163,564
Accounts Receivables 4,101
Inventories 50,845
Store Supplies 6,592
Receivables from the Limited 0
Other Current Assets 1,696
Property & Equipment, Net 110,504
Deferred Income Taxes 10,737
Other Assets 631
Accounts Payable 24,759
Accrued Expenses 60,197
Income Taxes Payable 33,587
Long-Term Debt 0
Other Long-Term Liabilities 10,828
Common Stock 517
Paid-In Capital 144,142
Retained Earnings 58,931
Treasury Stock 1,685
Net Sales 815,804
Cost of Goods Sold 465,000
General, Administrative and SO Expenses
150,652
Interest Income 3,144
Income Tax Expense 68,040
Total 1,092,978 1,092,978
Adjusting Journal Entries
Adjusting Journal Entries Debit Credit12. COGS 6,853
Inventories 6,853 13. G, A & SO Expenses 705
Store Supplies 705 14. G, A & SO Expenses 1,005
Other Current Assets 1,005 15. GA&SO Expenses 20,946
Property&Equipment 20,946 16. G, A & SO Expenses 3,685
Accrued Expenses 3,685
Adjusted T-accountsCOGS
(BB) 0(4) 465,000(12) 6,853 (EB) 471, 853
G,A&SO Expenses(BB) 0(11) 150,652(13) 705(14) 1,005(15) 20,946(16) 3,685 (EB)176993
Inventories(BB) 33,927(1) 481,918
465,000 (4)
6,853 (12) (EB) 43, 992
Store Supplies(BB) 5,592(2) 1,000
705 (13)
(EB) 5,887
Other Current Assets(BB) 1,296(11) 400
1,005 (14)
(EB) 691
Property and Equipment, Net
(BB) 70,517(9) 39,987
20,946
(15) (EB) 89,558
Accrued Expenses 35143 (BB) 25,054 (11) 3,685 (16) 63,882 (EB)
G,A&SO Expenses(BB) 0(11) 150,652(13) 705(14) 1,005(15) 20,946(16) 3,685 (EB)176,993
Adjusted Trial BalanceAbercrombie and Fitch
For Date Ending January 30th, 1999
Debits CreditsCash 163,564
Accounts Receivables 4,101
Inventories 43,992
Store Supplies 5,887
Receivables from the Limited 0
Other Current Assets 691
Property & Equipment, Net 89,558
Deferred Income Taxes 10,737
Other Assets 631
Accounts Payable 24,759
Accrued Expenses 63,882
Income Taxes Payable 33,587
Long-Term Debt 0
Other Long-Term Liabilities 10,828
Common Stock 517
Paid-In Capital 144,142
Retained Earnings 58,931
Treasury Stock 1,685
Net Sales 815,804
Cost of Goods Sold 471,853
General, Administrative and SO Expenses
176,993
Interest Income 3,144
Income Tax Expense 68,040
Total 1,096,663 1,096,663
Income StatementAbercrombie and Fitch Co.Consolidated Income Sheet
For the Year Ended January 30th, 1999Figures in thousands of dollars
Net Sales 815,804
Cost of Goods Sold, Occupancy and Buying Costs (471,853)
Gross Profit 343,951
General, Administrative and Store Operating Expenses (176,993)
Operating Income 166,958
Interest Income, Net 3,144
Income before Taxes 170,102
Provision for Income Taxes (68,040)
Net Income 102,062
Fiscal Year 1999 Closing EntryAbercrombie and Fitch Co.
For the Year Ended January 30th, 1999Figures in thousands of dollars
Closing Entries Debit Credit
Net Sales 815,804
Interest Income 3,144
Income Summary 818,948
Income Summary 716,886
COGS 471,853
Income Tax Expense 68,040
G, A & SO Expenses 176,993
Income Summary 102,062
Retained Earnings 102,062
Abercrombie and Fitch Co.Retained Earnings Statement
For the Year Ended January 30th, 1999Figures in thousands of dollars
Retained Earnings - January 31st, 1998
(58,931)
Net Income 102,062
Dividends Declared 0
Retained Earnings - January 30th, 1999
43,131
Abercrombie and Fitch Co.Consolidated Balance Sheet
For the Year Ended January 30th, 1999Figures in thousands of dollars
Assets
Current Assets:
Cash and Equivalents $163,564
Accounts Receivable $4,101
Inventories $43,992
Store Supplies $5,887
Receivable from the Limited $0
Other Current Assets $691
Total Current Assets $218,235
Property and Equipment, Net $89,558
Deferred Income Taxes $10,737
Other Assets $631
Total Assets $319,161
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts Payable $24,759
Accrued Expenses $63,882
Income Taxes Payable $33,587
Total Current Liabilities $122,228
Long-Term Debt $0
Other Long-Term Liabilities $10,828
Shareholders' Equity
Common Stock $517
Paid-In Capital $144,142
Retained Earnings $43,131
Treasury Stock, at Average Cost ($1,685)
Total Shareholders' Equity $186,105
Total Liabilities and Shareholders' Equity $319,161
Analysis
H.) The year over year percentage change in Net Sales for fiscal 1998 and 1999 is 56.40%
(815,804-521,617)/ 521, 617
This means that the company was able to move 50% more clothing in 1999 than in 1998. This could be the result of increased sales training for the Store Models (i.e. Associates) or a sexier and trendier marketing campaign.
I.) Inventory in 1999 was $43,992 (in thousands), compared to $33,927 in 1998 and $34,943 in 1997. Total assets in 1999 was $319,161 (in thousands), compared to $183,238 in 1998 and $105,761 in 1997.
This means that even though as total company assets tripled in three years (ie. More stores, storage, etc), it managed to keep inventory levels around $33 million to $44 million. Abercrombie and Fitch probably accomplished this by using just-in-time inventory management systems which can keep inventory levels lower.
J.) Abercrombie and Fitch Co is in the Apparel Stores industry of the Services sector. An investor has to compare ANF’s key financial figures with other comparable companies in the same industry. One has to compare key stats such as Price to Earnings ratio, Return on Equity, and Long Term Debt to Equity with other companies such as Limited (LTD), American Eagle Outfitters (AEO), etc.
1 Day Price Change % Market Cap P/E ROE % Div. Yield % Long-Term Debt to EquityPrice to Book Value Net Profit Margin % (mrq)
American Eagle Outfitters Inc. (AEO) 3.86 4.7B 11.90 29.82 1.90 NA 3.30 13.36
Urban Outfitters Inc. (URBN) 3.41 4.9B 34.94 19.91 NA NA 6.13 11.96
Limited Brands Inc. (LTD) 2.48 6.3B 9.08 33.33 3.50 1.40 3.04 0.62
Abercrombie & Fitch Co. (ANF) 3.35 6.6B 14.82 31.46 0.90 NA 4.10 17.64