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Bear of the Day: Abercrombie & Fitch (ANF) - Bear of the Day

The landscape continues to be challenging for many retailers despite improving economy and healing labor markets. Further those catering to teens have found it even more difficult to please their fickle clients.

About the Company

Abercrombie & Fitch ( ANF ) is a specialty retailer of casual apparel for men, women, and kids. The company was founded in 1892 and is headquartered in New Albany, Ohio. At the end of last year, they operated 799 stores in the U.S. and 170 stores in Canada, Europe, Asia, Australia and the Middle East.

Disappointing Results and Guidance

The company reported its Q4 results on March 4. Net sales for the quarter were $1.12 billion, down 14% with foreign currency impact accounting for approximately 270 basis points of the decline. The decline was led by international markets where sales were down 17%; US sales were also weak, down 6%.

Adjusted earnings of $1.15 per share were slightly ahead of the Zacks Consensus Estimate of $1.13, but were down 14.2% year over year. Further, the management warned of continued pressure on results in the months ahead.

Downward Revisions

Analysts have been cutting their estimates for the company after quarterly results. Zacks Consensus Estimates for the current and next year are now $1.07 per share and $1.18 per share respectively, down from $1.66 per share and $1.91 per share, 30 days ago. Declining estimates sent the stock back to Zacks Rank # 5 last month.

Dollar Headwinds

With about 35% of their revenue derived from outside the US, the company remains vulnerable to the dollar strength. While the dollar rally has taken a brief pause in the past couple weeks, the greenback is still expected to continue to strengthen this year, though at a slower pace now. During the conference call, the management reiterated that foreign currency rates are expected to be a significant headwind to their results in 2015.

The Bottom Line

This teen clothing retailer has been struggling with weak traffic and heavy promotional environment. With fast changing teen tastes, their sales have been plunging. They have taken a number of steps including closing some of their stores and removing their logos from their apparel (as teens apparently prefer unmarked clothes now) but as of now, none of those steps appear to have delivered any significant impact. While the stock has sold off significantly in the past six months, it still remains vulnerable to further decline.

Investors seeking exposure to the broader "Retail" industry could look at Citi Trends ( CTRN ), which currently enjoys a Zacks Rank # 1 (Strong Buy).

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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 Nasdaq, Inc.


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

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