After prolonged downside in the shares of
Abercrombie & Fitch Co.
), the stock witnessed a massive 13.9% rise in the afterhours
trading session, yesterday, on reports of better-than-expected
holiday sales and the resulting boom in full-year earnings
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This holiday season (nine-weeks ended Jan 4, 2014), overall
company comparable sales (comps) for this casual apparel retailer
declined 6%, including direct-to-consumer sales. While the plunge
mainly resulted from a 4% downside in U.S. comps and a 10%
decline in International comps, a 25% rise in direct-to-consumer
comps was an offset.
The fourth quarter-to-date comps performance surprised the
investor clan as the company's comps have been depicting a
downward trend, with negative comps results for the trailing 7
quarters. Moreover, the company had guided comps to fall in the
low double-digit range for the fourth quarter.
That said, Abercrombie & Fitch remains impressed by its
fourth quarter-to-date performance despite the challenging and
promotional retail environment. Notably, the company remains
encouraged by the strong performance of its direct-to-consumer
business that contributed about 25% to sales in December as well
as the sequential improvement in comps.
Overwhelmed by the strong quarter-to-date performance and smooth
progress on its cost reduction initiatives, the company raised
its adjusted earnings per share forecast to $1.55 - $1.65,
compared to $1.40 - $1.50 projected earlier. However, Abercrombie
& Fitch expects its comps performance for January to remain
below the quarter-to-date trend, resulting in stronger prior-year
Going forward, this Zacks Rank #3 (Hold) company expects
significant improvement in its business in 2014 and ahead, driven
by its stringent focus on successful execution of its long-term
On the other hand, most retailers reported lackluster results for
the holiday shopping period this year, followed by lowered
forecasts, as retailers suffered from lower traffic, an
intensified promotional environment, lesser shopping days between
Thanksgiving and Christmas, numerous icy storms and sluggish
consumer spending. Retailers that lowered their guidance battered
by the holiday results include
Family Dollar Stores Inc.
American Eagle Outfitters Inc.
L Brands Inc.