Abercrombie & Fitch
Read too much on Abercrombie and you'd think suspiciously attractive salespeople, geographically insensitive T-shirts, and unmistakably naked living mannequins were hurting business -- and perhaps they have. But like most apparel retailers, the company has historically failed investors primarily when it has failed shoppers by missing on style or price points.
Though a serious investor relations flap contributed, that's what drove most of the disastrous 2000 swoon, the only major blemish on the company's S&P 500-beating chart since it went public in 1996. (Admittedly, I'm ignoring a second steep drop centered on the market's crash and the events of September 11, 2001, which contributed to an extraordinarily difficult market environment for all high-markup retailers during traditionally important retail months.)
While I am sad to report an unsuccessful recent trip to Abercrombie in search of work-wearable pants -- management would probably tell me I was wasting my time -- other folks seem to be having better luck.
Last night, following a 4% Tuesday share price rise in anticipation, the company reported fiscal first-quarter (ended May 1) sales growth of 19%, which led to strong 16% net income growth. Inventories ended the quarter down from late January levels. The cash balance rose. Flat same-store sales were certainly a disappointment, as was the company's inability to tack a cash flow statement onto the end of its press release.
But should trends continue, the company says, investors can expect yet another quarter of earnings growth in the second quarter. Whatever investors may think of Abercrombie's marketing and other practices -- I've tried not to take sides here -- it seems hard to believe that the media's occasional uptake of anti-Abercrombie themes has done much besides provide welcome entry points for long-term investors who have stuck with management's judgment as, ultimately, all fashion investors must.
Share your thoughts on the retailer's results on the Abercrombie discussion board.
Fool contributor Dave Marino-Nachison doesn't own Abercrombie.