Abercrombie Shares Lose Momentum - Analyst Blog


Shares of Abercrombie & Fitch Co. ( ANF ) touched a new 52-week low of $31.69 yesterday before closing at $31.89. Notably, this teen apparel retailer has lost approximately 31.6% year-to-date primarily due to four consecutive quarters of waning top line.

The average volume of shares traded over the last 3 months was over 3,340K. Moreover, the company currently trades at a forward P/E of 21.72x, a 14.9% premium to the peer group average of 18.91x. The last traded price is 20.8% lower the Zacks Consensus average analyst price target of $40.29.

Abercrombie posted disappointing sales results in third-quarter fiscal 2013, marking lower-than-expected top-line results for the fourth consecutive quarter. The company's sales for the quarter declined 11.3% year over year to $1,033.3 million while it missed the Zacks Consensus Estimate of $1,035.0 million. Weak third-quarter sales resulted mainly from poor performance in the domestic market as well as a lingering sluggishness in the overall spending among youngsters.

Moreover, Abercrombie's comps performance depicts a downward trend, with negative comps results for the trailing 7 quarters. Further, the company is expecting comps to fall in the low double-digit range for the upcoming quarter.

Though the company is aggressively implementing strategies to counter the downward sales trend, we do not see any meaningful improvement in the near term, given the company's negative comps guidance for the fourth quarter.

A significant portion of the company's merchandise is manufactured overseas, in countries like Asia, and Central and South America. Further, international operations account for over one-fourth of the Abercrombie's revenues, which shows the company's considerable exposure to the political, social and economic risks of operating beyond national borders. This, along with foreign currency fluctuations, may adversely affect its results.

Alongside, we believe that Abercrombie's high dependence on outside suppliers, intense competition from discount retailers as well as the seasonality of its business may undermine growth prospects.

Other Stocks to Consider

Currently, Abercrombie carries a Zacks Rank #5 (Strong Sell). However, other better-ranked stocks in the apparel retail industry include G-III Apparel Group, Ltd. ( GIII ), Hanesbrands Inc. ( HBI ) and Michael Kors Holdings Ltd. ( KORS ). G-III Apparel and Hanesbrands hold a Zacks Rank #1 (Strong Buy) while Michael Kors has a Zacks Rank #2 (Buy).

ABERCROMBIE (ANF): Free Stock Analysis Report

G-III APPAREL (GIII): Free Stock Analysis Report

HANESBRANDS INC (HBI): Free Stock Analysis Report

MICHAEL KORS (KORS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: ANF , GIII , HBI , KORS



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