Why Abercrombie Shares Got Crushed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of teen apparel retailer Abercrombie & Fitch (NYSE: ANF  ) plummeted 20% today after its quarterly results and outlook missed Wall Street expectations.

So what: The stock has been sluggish in 2013 on concerns over declining traffic, and today's second-quarter results -- income plunged 33% on a revenue dip of 1% -- coupled with downbeat guidance only reinforce that trend. In fact, same-store sales fell 10% over the year-ago period, which include online sales and sales at stores open at least a year, suggesting that its popularity versus the likes of Forever 21 and H&M is declining more quickly than expected.

Now what: Management now sees third-quarter EPS of $0.40 to $0.45, well below the average analyst estimate of $1.07. "Despite the challenging environment, we are very pleased by strong growth in our direct-to-consumer business and continued strong growth in China," Chairman and CEO Mike Jeffries reassured investors. "In addition, we are nearing completion of our long-term strategic review, and we are confident that this will provide us with a clear roadmap for sustainable growth in sales, profitability and return on invested capital." Given Abercrombie's rapidly weakening competitive position and the overall sluggishness in teen spending lately, I wouldn't be so quick to buy into that optimism.   

The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.



Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2605933, ~/Articles/ArticleHandler.aspx, 10/21/2014 12:40:40 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement