Abercrombie & Fitch Co.
), a specialty retailer of premium, high quality casual apparel,
will release its first-quarter 2012 financial results on Wednesday,
May 16, 2012.
The current Zacks Consensus Estimate of 1 cent a share for the
quarter reflects a decline of 96.3% from the comparable prior-year
quarter's earnings of 27 cents per share. The estimates in the
current Zacks Consensus range between a low of negative 3 cents and
a high of positive 10 cents a share. The Zacks Consensus Revenue
Estimate is $1.05 billion for the quarter under discussion.
The sluggish average unit revenues (AURs) and higher average
unit costs (AUC) in the fourth quarter of 2011 put considerable
pressure on margins, leading to a fall of 78.9% in profits to $19.6
million from $92.6 million in the year-ago period.
Moreover, the company anticipates poor sales and AUR trends for
fiscal 2012 to be offset considerably by the reversing of AUC
trends in the latter half of 2012. Therefore, the above-mentioned
factors brought a drastic revision in the analysts' estimates for
the quarter under review.
Recap of the Fourth Quarter and Fiscal Year 2011
The company's fourth quarter adjusted earnings of $1.12 per
share came in line with the Zacks Consensus Estimate. However,
quarterly earnings were down 18.8% from the year-ago quarter's
earnings of $1.38 per share. For full-year 2011, the company's
adjusted earnings came in at $2.31 per share, missing the Zacks
Consensus Estimate of $2.33 per share, but well ahead of the
earnings of $2.05 per share in the year-ago period.
Abercrombie reported double-digit net sales growth of 16% in the
reported quarter, reaching $1.33 billion from $1.15 billion in the
prior-year quarter, almost in line with the Zacks Consensus
Estimate, reflecting a 4% rise in domestic sales and a robust 62%
surge in international net sales.
Full-year revenue at Abercrombie was $4.16 billion, up 20% year
over year and almost in line with the Zacks Consensus Estimate. The
year-over-year increase was attributable to a 10% increase in
domestic sales and a whopping 63% rise in international sales. The
company's net direct-to-customer sales for the year witnessed an
increase of 36% to $552.6 million.
Comparable store sales for the year were 5% higher than last
year, reflecting a 3% comps increase at Abercrombie & Fitch, a
4% surge at Abercrombie kids and an 8% rise at Hollister Co.
Going forward, Abercrombie expects earnings per share for fiscal
2012 to come in the range of $3.50 to $3.75. The company expects to
incur capital expenditure of nearly $400 million in fiscal 2012,
primarily due to new store openings and investments in the
distribution center and direct-to-consumer operations.
Zacks Agreement & Magnitude
Out of the 27 analysts covering the stock for the current
quarter, only one of the analysts raised the estimate in the last 7
or 30 days. However, while none of the analysts lowered their
estimates in the last 7 days, we see one downward revision in the
last 30 days. As a result, the Zacks Consensus Estimate remains
unchanged at 1 cent per share.
Mixed Earnings Surprise History
With respect to earnings surprises, Abercrombie has topped the
Zacks Consensus Estimate in three of the last four quarters. The
earnings surprise ranges from a low of negative 21.9% and a high of
positive 145.5%, with the average at 48.1%. This implies that the
company has beaten the Zacks Consensus Estimate by around 48% over
the past four quarters.
Neutral on Abercrombie
Abercrombie has a strong portfolio of well-established brands,
each of which is focused on the unique characteristics and rapidly
changing preferences of its target customers. In the face of
economic challenges, where teenagers have become less active
shoppers, Abercrombie has pulled up its socks to remain in
The company's debt-free balance sheet offers flexibility to
drive future growth. Moreover, the company continues to actively
indulge in capital spending on store openings and remodeling along
with investments in information technology, distribution centers
and other home office projects.
Abercrombie does not own or operate any manufacturing facility
and therefore purchases all its merchandise requirements from
outside. The company's operation may be adversely affected if these
manufacturers are not able to ship orders on time or meet its
Abercrombie operates in a highly fragmented market and competes
with national as well as regional players. Furthermore, apart from
larger retailers such as
), Abercrombie is facing increasing competition from value-priced
specialty retailers such as
Therefore, the company carries a Zacks #3 Rank implying
short-term Hold rating, and we retain our long-term Neutral
recommendation on the stock.
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