ANF
#Yes, we had an exciting launch with our Epic Flex for Hollister guys and we were very, very pleased to see the results.
We actually have Epic Flex in more than just denim.
We also have it in our shirts and our polos and we have exceeded our expectations in our selling.
Going forward, again, as we've been able to react to the business, we will continue to place orders appropriately.
So, yes, we've talked about and you will see in our investor presentation the brand positioning that we've landed for Abercrombie, which is to be the iconic American casual luxury brand for the twenty-something consumer.
Today, we actually have the majority of our consumers are over 20, so we are targeting that particular consumer.
As we did this research and we pressure-tested it around the world, we actually had very positive feedback from both our existing and hopefully future customers that it was the brand position that really resonated with our customer base.
Regarding the Areo marketshare going into the back half of the year, we are working diligently on our own plans and our own strategies relative to the marketing for both of our brand positions as we move into the back half of the year.
So first regarding the Hollister remodels, Q1 and Q2 cumulatively I think we said we've remodeled 32.
We have a balance of 20 left for the rest of the year and we will continue on this initiative as we move forward.
The ones that we just reopened for back-to-school are a little bit too early to read, but prior to that, they are continuing to meet our expectations.
I think your second question was regarding the tops business (multiple speakers).
Sure.
The Hollister business specifically, we have a very agile supply chain so we were able to affect our future on orders and have been able to really specifically figure out what the customer is looking for through listening to our customer and voice of customer and have adjusted those.
As far as A&F women's goes, we've decelerated a bit into the second quarter, but we still had strong performance out there in our tops business.
The majority of the change, <UNK>, would be related to the currency devaluation we saw during the quarter, which was predominantly the pound, but also to a lesser extent the euro.
Most of it was related to the pound devaluation.
Okay, starting with what did we learn.
We learned that our customer out there globally is very excited and very positive about our brand.
In fact, we have things quoted to us.
Like there's a latent affection for the brand.
We are excited to see what the brand is up to.
So there has been very, very positive feedback and we actually went around the world and pressure-tested all of our positions and got very positive feedback.
As far as pricing goes, specifically for A&F, we are comfortable with where our ticket pricing is.
I think one of the things that we really have to work on is our degree of promotion.
As we mentioned a little bit earlier today, we've been focused on reducing our promotional activity, but as far as pricing goes, we are positioned where we believe is appropriate for the product.
And I'm not sure the last piece of your question regarding product design.
Part of our brand strategy is honestly to be very clear on our fit and our value for our customer.
We will continue to reach out and make sure our customer goes through our reviews and our online information that we are able to get from our customer.
We seem to be able to tell whether or not ---+ we are set on where we are for our fit for Abercrombie as our quality goes as far as the adjustments for design.
No, I think we feel very good about our inventory position across the globe in terms of not only the overall quantity, but the content of that inventory as we move into the third quarter.
And inventory management has been a strength of ours as we've moved through this brand repositioning, and the teams have done a really nice job at managing and maintaining the inventory levels.
Yes, we were pleased with the DTC growth.
We did see growth across geographies and across brands, so it was very widely distributed, and one of the particular good things that we saw was that mobile ---+ we were able to capture very high increases in mobile traffic and conversion was up double digits, particularly in the mobile space.
So that's an area where we've been investing and those investments are paying off.
It's also a space where our customers prefer to shop.
They are increasingly going to their mobile device to browse and as an entry point for their shopping experience.
And we've been pleased with the results to date and we will continue to invest behind the DTC business.
There were some differences, but it was broadly positive across brands and geographies.
We certainly have a promotional plan that we are able to buy our product to provide for our customer the best prices that are out there.
We don't normally comment on our promotional pricing, but we feel that we are very strategically positioned in the mall with where we are.
We are able to do good, better, best pricing if that's what you are referencing, which we certainly have out there today and we will continue to have through the balance of the year.
That varies between our core basics and the customer that we can offer them some fashion at some higher price points.
We've been particularly pleased with the performance of newness and innovation and I think that's the other thing that we are hearing a lot about in the denim space and when we get behind newness and innovation both from a product perspective, but also with marketing, we've seen really nice response from our customers, so we offer that as well in the denim space.
Yes.
Our approach hasn't really changed.
We've been on this path for quite some time.
We have had a tremendous amount of flexibility and expect to continue.
We have tremendous flexibility going through 2017 as I noted in my comments earlier.
We expect that we will be closing more stores and we evaluate those based on the economic merits of each store and the specific positioning of each mall.
So our plans haven't changed.
We've been on this path for a while and we continue to leverage the level of flexibility that we do have.
Right.
Thanks, <UNK>.
I appreciate the opportunity to clarify.
What we did say regarding comps in the back half is that the environment we expect to remain challenging ---+ we've seen very persistent traffic headwinds and we expect that to continue in the back half.
As I mentioned, with currency devaluation and safety and security concerns, we see that more pronounced in our flagship and tourist business.
And we don't see a catalyst for that to change in the near term.
We are focused and confident that we are focused on the right priorities to improve those trends over time.
With the new brand leadership that we have on board, our focus on improving the product, improving the store experience, as well as the investments we are making behind marketing, we have confidence that over time we will show improvement in both traffic and top line.
Related to the margin conversation, what we've provided in the outlook is an expectation that margins will be managed flat for the year.
We do expect to see some headwinds in the third quarter in margin related to FX and as I mentioned, the FX headwinds are more pronounced in the third quarter and begin to abate in the fourth quarter.
The other lever within ---+ or the other two levers within margin, AUR, we expect to continue to show some slight improvement in AUR as we step away from promotional activity, but we also expect benefit from AUC in the back half and that's weighted more toward the fourth quarter.
We've talked about our continuous improvement, profit improvement efforts here.
We've had a lot of success over the years taking cost out of the business and we've evolved those efforts into a continuous improvement mindset in the Company.
And we are leveraging that for savings.
It's not big buckets of money in one specific area.
We are finding savings little ---+ to use a baseball expression ---+ we are hitting a lot of singles, not a lot of homeruns, but they are adding up.
And so we expect to continue to be able to drive operating expense improvement through those continuous profit improvement efforts and the efforts of the teams across the globe.
In terms of the long-term outlook for OpEx, we have also been able to leverage those savings to allow us to invest in the things that we think are important to drive our growth going forward and that includes the investments that we made in the second quarter in marketing.
We continue to invest in the DTC space.
As I mentioned a little while ago, those investments have been paying off with strong performance on the DTC side and we expect to continue to invest in marketing as we move through the back half.
I will pick up the AUC.
You are correct.
We do expect to see AUC benefit in the back half, more weighted toward the fourth quarter and that is the result of the currency and commodity price decreases that we've been able to take advantage of in the back half of the year.
As it relates to 2017, we haven't provided an outlook on our 2017 financials at this point and would look to do that as we move into the fourth quarter.
Regarding your second question, we did have some misses in Hollister.
I think that's what we've acknowledged, particularly in the girls tops business, but considering that we have an agile sourcing supply chain here, we were really able to react to what some of those challenges were and correct them going forward.
But you know what's really exciting is when we get it right, like we did with our Epic Flex promotion for the guys back to school, our customer really responds and has been incredibly positive about that product.
We have new leadership.
Kristin has brought in a tremendous amount of energy for that team.
She brings in a lot of leadership and experience that will continue to help us drive this business forward.
Yes, we continue to be pleased.
We continue to meet our expectations with the renovations.
The only thing I said was that the most recent ones during the previous period are a little bit hard to read already, but prior to that, we continue to be pleased with our ---+ meeting our expectations.
We are just beginning to talk to our customer.
We are beginning to bring together the brand position as well as our DNA and our voice out there for our customers.
We've spent a lot of time in the past year working on our customer experience, which was really for both brands, Abercrombie and Hollister.
Through our voice of customer, we are hearing very positive things about our customers' experience within the stores, so we will continue to move along that path.
Specifically the prototype, yes, we announced a couple of weeks ago that we will be launching a prototype in the first half of 2017.
Well, <UNK>, we definitely value the online shopper.
In fact, we expect most customers are browsing, if not shopping online, so we continue to invest in the omnichannel experience and we've seen nice response to the changes that we have made.
I think the online shopper is and has been more price-elastic, so there is definitely a customer out there for the clearance business online.
However, we see nice traction with the online shopper also with new products.
And increasingly, we are seeing that customer, our customer, shop on their mobile device and we've been very pleased with the conversion we are seeing, the changes that we've made to reduce friction in the shopping experience on a mobile device have yielded nice strong improvements in overall conversion.
So we've been pleased with the DTC business and we continue to invest in that space and we know that it's important for our customer specifically as one point of entry to the brands.
Yes, in terms of the basket size, the online basket size is higher.
And in terms of new customers, we are capturing new customers through social media, but those are details that we haven't disclosed previously.
Hi, <UNK>.
Yes, we are excited about our wholesale business, and what we've seen as we've rolled out the wholesale business in Europe, specifically through ASOS and through [Next] is it has been a nice complement to our other businesses there, both our in-store and our online business, our own online business.
So we are expanding our brand reach and reaching new customers through these wholesale channels, and with our Zalando announcement last week, we expect to have now access to 18 million new customers through that platform.
So we have been very pleased with the results.
From a product acceptance standpoint, I think we haven't learned anything specific from the selling there that we wouldn't see or haven't seen in our own business, but we have seen a nice complement to our businesses in those regions.
<UNK>, it's <UNK>.
Your question regarding marketing, so competitively we can't really comment on where we are headed for Q3 but what I can tell you is that the success of the things we've been doing in the business in Hollister and we are going to start to ramp up doing in our Abercrombie business is a holistic marketing campaign, which encompasses social, digital out there.
So we are going to continue on the path that we've been on.
