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3 Reasons To Buy This Well-Known Retail Stock
4/16/2013 12:30:00 PM
My first day working in New York City included a ferry ride across the Hudson River and then a shuttle to the office. Despite the early hour, the hustle and bustle of Midtown Manhattan was intense.
When the shuttle approached my stop, I saw a long line of teenagers and adults behindred velvet ropes; the line extended around the corner of a wide block. I thought they were probably waiting for some celebrity meet-and-greet or rock concert, but then I noticed the line was in front of a clothing store that I had seen in a local mall but never paid much attention to.
The next day, I noticed the same hubbub in front of the same store, and over the next few weeks, I became used to the daily red-velvet rope lineup. Clearly, this wasn't a one-timesale or special event -- customers were willing to stand in line every single day!
Imagine operating a clothing store and seeing hundreds of eager customers line up and wait each day for a chance to get inside and shop. I thought: "What a greatinvestment opportunity this retailer mustoffer ! Clearly any company with the marketing skills to draw such attention is doing something right."
If you haven't guessed, I'm talking about Abercrombie & Fitch ( ANF ) , a New Albany, Ohio-based retailer of casual clothing. The company's marketing deftly combines wholesome Americana with an edgy, sexy vibe from the live models who attract teenage locals and tourists from around the globe to its flagship Fifth Avenue store.
Founded in 1893, Abercrombie currently operates 912 stores in the United States and 139 international locations. The company also sells clothes under the lower-priced Hollister brand. Based on the pseudo-history of fictional adventurer John M. Hollister, the Hollister line appeals to international customers with its theme and lower price point.
The company posted its full-year 2012 results in February, and overall, things are lookingbullish .Net sales increased 8%, with internationalsales adding 36% and direct-to-consumer sales jumping 27%. However, U.S. sales slipped 1% on theyear .
Here's why I'm bullish on Abercrombie:
1. A strong 2013 outlook
Despite the strong 2012 performance and solid outlook for 2013, Abercrombie'sstock has been trading in a tight range between $46 and $52. Waiting for a breakout close above $52 makes technical sense.
Risks to Consider:
Weakness in Europe and the slowing of sales in the United
States have created headwinds for Abercrombie. This type of
business is extremely connected to consumer sentiment and
spending capacity. While the company is making smart moves into
international markets, the European situationwill continue to
loom over performance and investor perception for the foreseeable