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Abercrombie & Fitch Co. Message Board

  • zajecbob zajecbob May 20, 2009 10:02 AM Flag

    Without Ruehl

    Take out Ruehl's 10 mill of sales this quarter and ANF is still down 20%. It will be interesting to see how much cash Ruehl will burn up??? Everyone says how ANF has lots of cash and has no debt...GOOD THING NOW! This would have been a hick-up 2 years ago. Today it is much more than that! No taht they will be cutting prices it will be interesting to see if customers "flock" back. Time will tell.

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    • Fair enough. I really think the announcement was a bit weird and am less baffled by the lease liability than I am the "55mm we'll give you the real number later".

    • Thank you for this post with helpful examples. D.E.M.O. is an example of what I've been trying to say on this board. Specifically, when PacSun discontinued D.E.M.O., based on page f-12 of their 2008 10-K, they negotiated settlements to get out of the leases resulting in an adjustment to liabilities of a 1.9 million dollar reduction in that case.

      Specifically, the footnote says:

      (2) Adjustments to the demo liquidation liabilities were based on settlement amounts that differed from the original estimate as a result of good faith
      negotiations with individual landlords and actual performance of the liquidation process.

      As PacSun had 25 million in cash and no direct borrowings at the end of 2008, according to that 10K, they appear to have been able to afford the full costs related to the leases, but they negotiated a lower cost. And I would wager that an incentive to give up these costs were to avoid litigation, especially if the leases were in the name of a different company than the parent. But whatever the case, contrary to the other poster who called me young and wide-eyed or something, in the real world, just because a liability sits on a financial statement doesn't mean a better result can't be negotiated using legal strategies.

      For clarification to your post, "the Company", as I mentioned in an earlier post, refers to A&F and all its subsidiaries whenever mentioned in the 10K, as explained at the beginning of the document.

    • That's a good point zajecob, if (i) everyone with a differing opinion than you, or (ii) who asks you to substantiate comments like why Gilly Hicks has terrible numbers (even though you chose to ignore backing up that one), or (iii) points out that someone is using incorrect information to substantiate their arguments; well if everyone who did that just shut up, then maybe this stock would stop going up 2% on down days like today, and your short positions would be doing better! But hopefully not, since hopefully, there's no correlation between message board posts and stock performance.

    • It seems to me that lease commitments are a general corporate obligation whether subsidiary units are operated as divisions of the parent corporation or as wholly-owned subsidiary corporations. That is, that the parent is going to take the financial hit for any closings, just as it is indicated in 10-Ks that the parent is financially responsible to make rental payments. With ANF specifically, see Note 7 to the financial statements, which clearly states it's "the Company" that is "committed to non-cancelable leases."

      No company I know of that has killed divisions or wholly-owned subsidiaries and closed or converted their stores has escaped responsibility for their lease obligations: ARO (Jimmyz), CBK (Acorn), CHIC (Rampage), CHS (Pazo), CLE (Mr. Rags), GPS (Forth & Towne), GYMB (Janeville), MW (Eddie Rodriguez), NWY (Jasmine Sola), PSUN (d.e.m.o. and 10,000 Steps), and TLB (Talbot Kids, Talbot Mens) are in my memory over the last 10 years or so. TLB also has been trying for many moons to sell its J. Jill operation (283 stores at Jan. 31), and if they decide to close them, they'll take a substantial hit).

    • It seems to me that lease commitments are a general corporate obligation whether subsidiary units are operated as divisions of the parent corporation or as wholly-owned subsidiary corporations. That is, that the parent is going to take the financial hit for any closings, just as it is indicated in 10-Ks that the parent is financially responsible to make rental payments. With ANF specifically, see Note 7 to the financial statements, which clearly states it's "the Company" that is "committed to non-cancelable leases."

      No company I know of that has killed divisions or wholly-owned subsidiaries and closed or converted their stores has escaped responsibility for their lease obligations: ARO (Jimmyz), CBK (Acorn), CHIC (Rampage), CHS (Pazo), CLE (Mr. Rags), GPS (Forth & Towne), GYMB (Janeville), MW (Eddie Rodriguez), NWY (Jasmine Sola), PSUN (d.e.m.o. and 10,000 Steps), and TLB (Talbot Kids, Talbot Mens) are in my memory over the last 10 years or so. TLB also has been trying unsuccessfully for many moons to sell its J. Jill operation (283 stores at Jan. 31), and if they decide to close them they'll take a substantial hit).

    • You da man msch!!! Great post and as you said not really worth the time but at least you will shut him up!

    • This debate began in response to my comment in reply to yours that "If they close, I would imagine that an issue affecting costs would be who executed/guaranteed the leases, i.e. ANF or a subsidiary company."

      I have repeatedly said that I do not know which company executed the leases as the 10K does not specify that in the lease section.

      I completely understand that all of your accounting-related post might make wonderful submissions in a civil case concerning any lease. But if the leases are not executed or guaranteed by the parent company, then the tenant may have bargaining power with any landlord that wants to avoid litigation, in the renegotiation of any lease or conditions of its termination, and this would affect costs.

    • You keep cutting and pasting things hoping they make an argument that you don't understand. Since you don't understand accounting, you don't understand what you're cutting and pasting.

      It's fruitless for me to try and talk to you because you'll just keep cutting and pasting more irrelevant things.

      When GM bought Saab, they bought it as a stock holding. When they're stock holding got to 100%, it became a wholly owned subsidiary. SAAB's earnings were retained in SAAB. When SAAB declared bankruptcy, it was no different to GM than Enrons bankruptcy to Joe Bortz. They lost their shareholdings. GM has owned dozens of companies like this, EDS being one of them.

      Abercrombie carries the assets and liabilities of it's "subsidiaries" on it's balance sheet. Leases are assets. lease credits are liabilities. Unpaid rent is in the footnotes. If Rhuel closes stores, it's not a a bankruptcy, it's a store closing. Abercrombies been opening and closing stores as long as I've tracked them.

      The opening and closing of ANF's stores has generated literally hundreds of pages of accounting regulations. ANF originally called the closing of a store a recap. FASB ruled that it had to be an actual new store, not a refurb and 200 ft move of an existing one.

      Had ANF opened Rhuel as a separate corporation and capitalized with as paid in capital, you could argue that the leases MAY not be liabilities, but for that to happen, sales and earnings would have to accrue to a separate corporation. Show me that on ANF's financial statement.

      The reason I'm wasting my time here is that you appear to be young and wide eyed. The CEO see's the financial statement as his tool to bamboozle shareholders and screw them out of their money. Few are as talented as Jefferies.

      If there's something you want to analyze in ANF, screw the leases. Look at the Rabbi trust. That's where the real hosing is probably going on.

    • Hey, I just asked you what authority you were relying upon, and you responded with a few counterpoints based on facts that were mistaken based on corporate filings.

      But that's okay, I don't need an accounting lesson, because I'm fairly certain that if a tenant tells a landlord they want out of a lease or the tenant defaults on a lease, the landlord doesn't go running to the accountants - they might rather talk to their lawyers, given this issue relates to corporate and contract law.

      And the lawyers may or may not mention cases like the one in this article (which I do not know how many times it has been followed or not followed by other courts, because I've randomly selected it from Google):

      http://www.blankrome.com/index.cfm?contentID=37&itemID=403

      In that case, Blimpie's parent company was responsible for its subsidiaries' default, but each case is different, as indicated in the article.

    • You don't know what you're talking about and I'm not going to teach you accounting.

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