Question

The following data are based on information in the 2016 annual reports of Abercrombie & Fitch, Co., and American Eagle Outfitters, Inc. Dollar amounts are in thousands. Abercrombie & Fitch is a specialty retailer of apparel and accessories for men and children. As of January 30, 2016, it operated 754 stores in the United States and 178 stores outside the United States. American Eagle Outfitters, Inc. is a specialty retailer of clothing and accessories for men and women. As of January 30, 2016, it operated 904 stores in the United States and 143 stores outside the United States. Assets Liabilities Stockholders' equity Revenues Expenses Dividends Retained earnings at the beginning of the year Abercrombie & Fitch $2,433,839 1,137, 317 1,295,722 3,518,680 3,483,104 55, 145 2,550, 673 American Eagle Outfitters $1,612,246 568,878 1,843,376 3,521,848 3,303,710 99,624 153,885 Required a. Calculate each company's net income and retained earnings for 2016. b. For each company, calculate its net earnings as a percentage of its revenues. c. Which company performed better in 2016? Complete this question by entering your answers in the tabs below. Required A Required B Required C

Answer 1

Part a
Calculation of Net Income
		Abercrombie & Fitch	American Eagle Outfitters
Revenues		35,18,680	35,21,848
Less: Expenses		34,83,104	33,03,710
Net Income		35,576	2,18,138
Calculation of Retained Earnings
		Abercrombie & Fitch	American Eagle Outfitters
Retained Earnings at the beginning of the year		25,50,673	15,43,085
Add : Net income		35,576	2,18,138
Less: Dividends		-55,145	-99,624
Retained Earnings at the end of the year		25,31,104	16,61,599
Part b
Net Earnings		35,576	2,18,138
Revenues		35,18,680	35,21,848
Net Earnings as a % of Profits		1.01%	6.19%
Part c
In terms of Profitability, American Eagle Outfitters has performed better in 2016.
In terms of number of domestic and international stores, American Eagle Outfitters has outperformed Abercrombie & Fitch.