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Offload Abercrombie, Buy These 5 Retail Stocks Instead
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The debacle triggered by the Brexit vote in the financial arena has compelled even the most stoic investors to look for safer counters to invest their money. Thus, it would be prudent to exit an underperforming stock before it hurts your portfolio’s returns. Abercrombie & Fitch Co. (ANF - Free Report) is one such stock that is struggling to find a place in investors’ portfolio. Why is it so?
Shares of this specialty retailer of casual apparel have nosedived roughly 35% year to date and there seems to be no catalyst to help it regain the lost momentum. Moreover, the company currently carries a Zacks Rank #5 (Strong Sell) with a VGM Score of “D”. This clearly implies that analysts covering the stock are not convinced about Abercrombie’s performance in the near future.
Why the Stock is Out of Favor Now
After three straight quarters of positive earnings surprises, Abercrombie slipped to a loss in first-quarter fiscal 2016. Also, the loss was wider than the Zacks Consensus Estimate. Moreover, the company’s sales missed expectations and fell year over year owing to soft traffic trends in international markets as well as its U.S. flagship and tourist stores.
Additionally, adverse foreign currency fluctuations have been weighing on Abercrombie’s results as more than a quarter of its total revenue comes from overseas operations. These headwinds had a nearly 5 cents per share adverse impact on the company’s bottom-line results in the fiscal first quarter.
Consequently, the Zacks Consensus Estimate of 87 cents and $1.11 for fiscal 2016 and fiscal 2017 has dropped 31 cents and 32 cents, respectively, over the past 60 days. Moreover, the Zacks Consensus Estimate for the second quarter has widened to a loss of 21 cents from 7 cents over the same time frame.
With Abercrombie’s share price tumbling and estimates witnessing downward revisions, it may not be prudent to keep the stock in your portfolio, at least for the time being. Rather, you can shift your focus to better-ranked retail stocks that are backed by sound Zacks Consensus Estimate revision, a VGM Score of “A” and sturdy fundamentals.
5 Prominent Picks
You can count upon Dave & Buster's Entertainment, Inc. (PLAY - Free Report) , which owns and operates entertainment and dining venues, and flaunts a Zacks Rank #1 (Strong Buy) with a VGM Score of “A”. This Dallas, TX-based company delivered an average positive earnings surprise of 104.8% over the trailing four quarters and has a long-term earnings growth rate of 19.2%. The company is expected to witness earnings growth of 29.2% in fiscal 2016 and 16.3% in fiscal 2017. The Zacks Consensus Estimate too has moved up over the past 30 days.
We also suggest investing in Lowe's Companies, Inc. (LOW - Free Report) , which holds a Zacks Rank #2 (Buy), and has a VGM Score of “A” with a long-term earnings growth rate of 15.6%. The Mooresville, NC-based company delivered an average positive earnings surprise of 0.6% over the trailing four quarters. This home improvement retailer is expected to witness earnings growth of 22.5% in fiscal 2016 and 16.2% in fiscal 2017. The Zacks Consensus Estimate too has increased over the past 60 days.
Burlington Stores, Inc. (BURL - Free Report) , with a Zacks Rank #2 and long-term earnings growth rate of 17.7%, is a solid bet. This Burlington, NJ-based retailer of branded apparel products delivered an average positive earnings surprise of 23.2% over the trailing four quarters and has a VGM Score of “A”. It is expected to witness earnings growth of 21.5% in fiscal 2016 and 16.5% in fiscal 2017. The Zacks Consensus Estimate too has been on the rise over the past 60 days.
Another stock that deserves a place in your portfolio is The Home Depot, Inc. (HD - Free Report) , which has a Zacks Rank #2, a long-term earnings growth rate of 13.7% and a VGM Score of “A”. This Atlanta, GA-based home improvement retailer delivered an average positive earnings surprise of 4.2% over the trailing four quarters. It is expected to witness earnings growth of 16.5% in fiscal 2016 and 13.1% in fiscal 2017. The Zacks Consensus Estimate too has been trending up over the past 60 days.
Last but certainly not the least addition to your portfolio can be BJ's Restaurants, Inc. (BJRI - Free Report) , with a VGM Score of “A”. This operator of casual dining restaurants carries a Zacks Rank #2 and a long-term earnings growth rate of 17.9%. This Huntington Beach, CA-based company delivered an average positive earnings surprise of 18.5% over the trailing four quarters. It is expected to witness earnings growth of 22.1% in 2016 and 13.6% in 2017. The Zacks Consensus Estimate too has been rising over the past 90 days.
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Offload Abercrombie, Buy These 5 Retail Stocks Instead
The debacle triggered by the Brexit vote in the financial arena has compelled even the most stoic investors to look for safer counters to invest their money. Thus, it would be prudent to exit an underperforming stock before it hurts your portfolio’s returns. Abercrombie & Fitch Co. (ANF - Free Report) is one such stock that is struggling to find a place in investors’ portfolio. Why is it so?
Shares of this specialty retailer of casual apparel have nosedived roughly 35% year to date and there seems to be no catalyst to help it regain the lost momentum. Moreover, the company currently carries a Zacks Rank #5 (Strong Sell) with a VGM Score of “D”. This clearly implies that analysts covering the stock are not convinced about Abercrombie’s performance in the near future.
Why the Stock is Out of Favor Now
After three straight quarters of positive earnings surprises, Abercrombie slipped to a loss in first-quarter fiscal 2016. Also, the loss was wider than the Zacks Consensus Estimate. Moreover, the company’s sales missed expectations and fell year over year owing to soft traffic trends in international markets as well as its U.S. flagship and tourist stores.
Management expects the fiscal second quarter to remain challenging, which will result in lower comparable store sales and gross margin. (Read: Abercrombie Stock Down as Q1 Loss Misses Estimates)
Additionally, adverse foreign currency fluctuations have been weighing on Abercrombie’s results as more than a quarter of its total revenue comes from overseas operations. These headwinds had a nearly 5 cents per share adverse impact on the company’s bottom-line results in the fiscal first quarter.
Consequently, the Zacks Consensus Estimate of 87 cents and $1.11 for fiscal 2016 and fiscal 2017 has dropped 31 cents and 32 cents, respectively, over the past 60 days. Moreover, the Zacks Consensus Estimate for the second quarter has widened to a loss of 21 cents from 7 cents over the same time frame.
With Abercrombie’s share price tumbling and estimates witnessing downward revisions, it may not be prudent to keep the stock in your portfolio, at least for the time being. Rather, you can shift your focus to better-ranked retail stocks that are backed by sound Zacks Consensus Estimate revision, a VGM Score of “A” and sturdy fundamentals.
5 Prominent Picks
You can count upon Dave & Buster's Entertainment, Inc. (PLAY - Free Report) , which owns and operates entertainment and dining venues, and flaunts a Zacks Rank #1 (Strong Buy) with a VGM Score of “A”. This Dallas, TX-based company delivered an average positive earnings surprise of 104.8% over the trailing four quarters and has a long-term earnings growth rate of 19.2%. The company is expected to witness earnings growth of 29.2% in fiscal 2016 and 16.3% in fiscal 2017. The Zacks Consensus Estimate too has moved up over the past 30 days.
We also suggest investing in Lowe's Companies, Inc. (LOW - Free Report) , which holds a Zacks Rank #2 (Buy), and has a VGM Score of “A” with a long-term earnings growth rate of 15.6%. The Mooresville, NC-based company delivered an average positive earnings surprise of 0.6% over the trailing four quarters. This home improvement retailer is expected to witness earnings growth of 22.5% in fiscal 2016 and 16.2% in fiscal 2017. The Zacks Consensus Estimate too has increased over the past 60 days.
Burlington Stores, Inc. (BURL - Free Report) , with a Zacks Rank #2 and long-term earnings growth rate of 17.7%, is a solid bet. This Burlington, NJ-based retailer of branded apparel products delivered an average positive earnings surprise of 23.2% over the trailing four quarters and has a VGM Score of “A”. It is expected to witness earnings growth of 21.5% in fiscal 2016 and 16.5% in fiscal 2017. The Zacks Consensus Estimate too has been on the rise over the past 60 days.
Another stock that deserves a place in your portfolio is The Home Depot, Inc. (HD - Free Report) , which has a Zacks Rank #2, a long-term earnings growth rate of 13.7% and a VGM Score of “A”. This Atlanta, GA-based home improvement retailer delivered an average positive earnings surprise of 4.2% over the trailing four quarters. It is expected to witness earnings growth of 16.5% in fiscal 2016 and 13.1% in fiscal 2017. The Zacks Consensus Estimate too has been trending up over the past 60 days.
Last but certainly not the least addition to your portfolio can be BJ's Restaurants, Inc. (BJRI - Free Report) , with a VGM Score of “A”. This operator of casual dining restaurants carries a Zacks Rank #2 and a long-term earnings growth rate of 17.9%. This Huntington Beach, CA-based company delivered an average positive earnings surprise of 18.5% over the trailing four quarters. It is expected to witness earnings growth of 22.1% in 2016 and 13.6% in 2017. The Zacks Consensus Estimate too has been rising over the past 90 days.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>