1. THEODORE UDELSMAN, CATHERINE SON ABERCROMBIE & FITCH: SALES AND FORECAST ANALYSIS

2. COMPANY BACKGROUND Originally sporting goods store, now clothing retailer Headquartered in New Albany, OH (Home Office) Brands: Abercrombie & Fitch – 253 US locations, 22 International abercrombie kids – 131 US, 5 International Hollister Co. – 458 US, 129 International Competitors: Aéropostale, American Eagle Outfitters Began international expansion campaign in 2005 Canada Europe (2007): England, Italy, Denmark, France, Spain, Germany, Belgium, Ireland, Netherlands Asia (2009): Japan, China, Korea

3. 2013 MIKE JEFFRIES CONTROVERSY Business Insider uncovered a quote from a 2006 interview with Mike Jeffries “In every school there are the cool and popular kids, and then there are the not-so-cool kids. Candidly, we go after the cool kids. We go after the attractive all-American kid with a great attitude and a lot of friends. A lot of people don’t belong [in our clothes], and they can’t belong. Are we exclusionary? Absolutely. Those companies that are in trouble are trying to target everybody: young, old, fat, skinny. But then you become totally vanilla. You don’t alienate anybody, but you don’t excite anybody, either.” Company image was ruined quickly thereafter Consumers were outraged with statement and demanded he step down from CEO position

4. DATA SOURCE Collected data from A&F’s 10-K and 10-Q SEC filings Based results and forecasts on sales data from 2007- 2014 Broke down each year into quarters (Q1-Q4) Consistent peak in Q4

5. DATA BREAKDOWN Non-Adjusted Raw Data Retail Model data reflects some cyclical trends towards Q4 and some seasonal trends towards holidays Luxury products Strong growth ‘11-’12 but surging a bit downward as of late

6. TIME SERIES MODEL RESULTS

7. EXPONENTIAL SMOOTHING METHOD Large RMSE: $215,301,939.7 Alpha: 0.1488 This is expected as it is the most basic model It does not take into account any seasonality or cyclical trends in the business model Data is has clear evidence of such trends

8. EXPONENTIAL SMOOTHING METHOD

9. HOLT’S METHOD Largest RMSE: $228,690,799.3 Alpha: 0.3988 Beta: 0.1070 Adds into account a growth factor (beta) however due to Abercrombie's established business position and fluctuating growth this throws off our forecasts slightly from the last model. Many factors can be taken into account: 1. Seasonality 2. Recession/Economy – goods are considered luxury 3. PR scandals 4. Growth of competition 5. Business Model

10. HOLT’S METHOD

11. WINTER’S METHOD (MULTI)

13. WINTER’S METHOD (ADD) RMSE: $80,281,534.7 Alpha: 0.7938 Beta: 0.0369 Gamma: 0.4776 Good forecasting model Takes into account trends AND SEASONALITY Captures huge Q4 growth (Holiday Seasons) Forecasting Revenue Forecast: 2014 Q3 = $1,024,046,0092014 Q4 = $1,271,551,955 2015 Q1 = $820,684,617.072015 Q2 = $868,450,267.50 2015 Q3 = $1,005,706,1832015 Q4 = $1,253,212,129

14. WINTER’S METHOD (ADD)

15. CONCLUSION Winter’s (Multi) had lowest RMSE of all methods $59,042,215.2 Seasonal trends in Q4 due to holidays A&F had experienced a steady increase in sales from 2009-2012 Sales declined in 2013 after a scandal involving Mike Jeffries Sales will continue to decline in the future Compared to previous year’s corresponding quarter

16. FUTURE RECOMMENDATIONS As a retailer, A&F should consider repositioning its brand image Offer clothing that is up-to-date with current trends Compete with “fast fashion” brands (Forever 21, H&M) Target a wider demographic to compensate for Jeffries’s statement in the controversial interview Close underperforming brick-and-mortar locations Focus on e-commerce business Continue international expansion plans A&F still has a strong brand image overseas

17. THANK YOU Questions?