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Abercrombie & Fitch Co.

– Case Study
Permanent accounts
9 Asset T-accounts

Cash and Equivalents (EB)


(BB) 89,558
42,667 Store Supplies
(3) (6) (BB) 5,592
800,000 514,114 (2) 1,000 Deferred Income
(5) 705 Taxes
13,398 (8) 50,000 (13) (BB) 3,759
(7) (11) 6,978
23,785 (10) 908
(11) (EB) 5,887
151,264
(EB) (EB) 10,737
163,564 Receivable from
Limited.
(BB) Other Assets
23785
Accounts Receivable (BB) 0
23,785
(BB) 1695 (7) (11) 631
(3)
15,804
13,398 (EB) 631
(5) (EB) 0

Other Current Assets *Note: (EB) – Ending


4,101
(BB) balance, (BB) –
1296 Beginning balance
(11)
Inventories 400
(BB) 33927 1,005
(1) 481,918 (14)
465,000
(4) (EB) 691
6,853 (12)

(EB) 43, Property and


992 Equipment, Net
(BB)
70,517
(9)
39,987
20,946
(15)
9 Liability and Owners’ Equity T-accounts

Accounts Payable (EB) 58,931


15,968 (BB)
(6) 514,114 481,918 (1) Long-term Debt
1,000 50,000
(2) (BB)
39,987 (9) (8) 50,000

(EB) 24,759

(EB) 0
Accrued Expenses
35143 (BB)
25,054 (11) Other Long-term
Liabilities
3,685 (16)
7,501 (BB)
3,327 (11)
63,882 (EB)

Income Taxes (EB) 10,828


Payable
15,851 (BB)
17,736 (11) Common Stock
511 (BB)
6 (11)

33,587 (EB)

517 (EB)

Paid-In Capital
117,972 (BB)
26,170 (11)

144,142 (EB)

Retained Earnings
(BB) 58,931
(BB) 777
(10) 908 (EB) 1,685
Treasury Stock

Temporary Accounts
5 T-accounts

Sales
(BB) 0
815,804 (3) Interest Income
(BB) 0
(EB) 815,804 (11) 3,144

(EB) 3,144
COGS
(BB) 0
(4) 465,000 G,A&SO Expenses
(12) 6,853 (BB) 0
(EB) 471, 853 (11) 150,652
(13) 705
(14) 1,005
Income Tax Expense (15) 20,946
(BB) 0 (16) 3,685
(11) 68,040 (EB)176993

(EB) 68,040
Unadjusted Trial Balance
Abercrombie and Fitch Co.

For Date Ending January 30th, 1999

Debits Credits
Cash 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 150,652
Expenses
Interest Income 3,144
Income Tax Expense 68,040
Total 1,092,978 1,092,978
Adjusting Journal Entries
Adjusting Journal Entries Debit Credit
12. 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-accounts

COGS (1) 481,918


(BB) 0 465,000
(4) 465,000 (4)
(12) 6,853 6,853 (12)
(EB) 471, 853
(EB) 43,
992
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
(16) 3,685
(EB)176,993
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
Adjusted Trial Balance
Abercrombie and Fitch

For Date Ending January 30th, 1999

Debits Credits
Cash 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 176,993
Expenses
Interest Income 3,144
Income Tax Expense 68,040

Total 1,096,663 1,096,663


Income Statement
Abercrombie and Fitch Co.
Consolidated Income Sheet
For the Year Ended January 30th, 1999
Figures in thousands of dollars
Net Sales 815,8
04
Cost of Goods Sold, Occupancy and Buying (471,
Costs 853)
Gross Profit 343,9
51
General, Administrative and Store Operating (176,
Expenses 993)
Operating Income 166,9
58
Interest Income, Net 3,1
44
Income before Taxes 170,1
02
Provision for Income Taxes (68,
040)
Net Income 102
,062
Fiscal Year 1999 Closing Entry
Abercrombie and Fitch Co.
For the Year Ended January 30th, 1999
Figures 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, 1999
Figures in thousands of dollars
Retained Earnings - (58,931)
January 31st, 1998

Net Income 102,062

Dividends Declared 0

Retained Earnings 43,131


- January 30th,
1999
Abercrombie and Fitch Co.
Consolidated Balance Sheet
For the Year Ended January 30th, 1999
Figures 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 Equity Price 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