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Why Abercrombie & Fitch Stock Dropped 30.8% in March

By Parkev Tatevosian - Apr 4, 2020 at 9:25PM

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The retail apocalypse may be accelerated after the coronavirus pandemic.

What happened 

Shares of Abercrombie & Fitch (ANF 1.77%) fell 30.8% in March and are now down 53.4% year to date. The brick-and-mortar retailer was not immune to the broad market sell-off of most retailers' stocks, as a result of the disruption and uncertainty caused by the novel COVID-19 coronavirus pandemic.

Clothes hanging on a rack at Abercrombie & Fitch

Image source: Getty Images.

So what 

Retailers have been hit hard during the pandemic, as governments order nonessential businesses to stop physical operations. Abercrombie & Fitch will continue to keep its stores outside the Asia-Pacific region closed until further notice.

Before the outbreak turned for the worse, the company released its results for its fourth quarter on March 4, where comparable-store sales increased 1% and net sales increased by 3%. Now, with a significant share of its sales coming from the U.S. and all of those stores being closed, the next quarter will be a big challenge.

In a statement on March 26, CEO Fred Horowitz said, 'We entered this period of unprecedented uncertainty with a healthy liquidity position and are taking immediate, aggressive, and prudent actions, including re-evaluating all expenditures to enhance our ability to meet the business' short-term liquidity needs."

Still, the company had $671 million in cash and equivalents at the end of the quarter, and since then, the company initiated the process to borrow $210 million in funds from its credit facility to shore up its balance sheet.  

Now what

Stores across all Abercrombie & Fitch brands in the Asia-Pacific region are back up and running. It's too soon to tell if customers are returning to shopping at the level before the outbreak, or if they'll return to brick-and-mortar stores at all. Furthermore, no one knows how long and how severe the impacts of the coronavirus outbreak will be around the rest of the world. Given that level of uncertainty, it's no surprise that investors sold shares of this consumer discretionary stock in March.  

Parkev Tatevosian has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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