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Why Abercrombie & Fitch Co. Shares Flew

By Brian D. Pacampara, CFA – Jan 10, 2014 at 11:11AM

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Is this meaningful? Or just another movement?

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 Co. (ANF -0.42%) popped 11% today after its fourth-quarter update and outlook impressed investors.

So what: The stock has slumped in recent months on concerns over plummeting sales, but today's Q4 update -- same-store sales are down just 6% so far -- coupled with upbeat guidance suggests that things are stabilizing. Management cited successful cost-cutting initiatives and better-than-expected demand for the positive report, giving analysts plenty of good vibes over Abercrombie's turnaround prospects.

Now what: Management now sees full-year adjusted EPS of $1.55-$1.65, up from its prior prediction of $1.40-$1.50. "[F]all season carryover inventory levels are well controlled as we move into the new season," said Chairman and CEO Mike Jeffries. "We continue to focus on execution against our long-term strategic plans, which we believe will drive meaningful improvements in our business in 2014 and beyond." With the stock still off more than 30% from its 52-week highs and sporting a 2%-plus dividend yield, buying into that turnaround talk might even be worth considering.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Abercrombie & Fitch Stock Quote
Abercrombie & Fitch
ANF
$23.88 (-0.42%) $0.10

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