Shares of Abercrombie & Fitch Co. (ANF Quick QuoteANF - Free Report) have declined 7.3% since the company put a halt to the discussions of selling itself on Jul 10. Further, the stock has slumped 29.4% in the last one month. While the recent decline in share price is primarily due to its decision to remain unsold, this leading clothing retailer has also been struggling to combat retail industry challenges related to soft store and mall traffic.

In May 2017, the company had revealed that it was in discussion with several parties including specialty retailer American Eagle Outfitters Inc. (AEO Quick QuoteAEO - Free Report) , for potentially selling itself. However, after a detailed review of all relevant factors, Abercrombie recently concluded that aggressively pursuing the previously announced strategic initiatives would work best for the company and its shareholders.

In fact, this fashion retailer’s shares have plunged nearly 55.1% in the last year, wider than the Zacks categorized Retail – Apparel/Shoe industry’s decline of 25.8%. Currently, the industry is placed at bottom 12% of the Zacks Classified industries (226 out of 256). On the contrary, the broader Retail-Wholesale sector gained 13.1% but is placed at bottom 6% of the Zacks Classified sectors (15 out of 16).

That said, most of the industry pundits are wondering whether the company’s strategies really hold the potential to keep it afloat individually. Let’s find out.

Strategic Initiatives and Growth Avenues

Abercrombie is striving hard to spark a turnaround in its performance by focusing on implementing the strategies like cost saving efforts, capital investments, loyalty and marketing programs. Also, it is on track with reviving its brands, enhancing performance and returning to profitable growth.

In fact, management is improving its leadership team and organizational structure; optimizing store fleet by introducing stores in high-performing markets, while closing the underperforming ones; remodeling stores and improving assortments to meet changing trends and demands; developing omni-channel capacities and focusing on key merchandise and design processes.

Notably, this Zacks Rank #3 (Hold) company remains optimistic about delivering solid performance at Hollister and robust direct-to-customer sales in the near term. Evidently, the Hollister brand is gaining from the positive customer response to product innovations, emerging categories and overall customer experience. In fact, comparable store sales (comps) at Hollister brand were up 3% in the fiscal first quarter as it continued to capitalize on momentum, delivering positive comps in both the U.S. and international markets. Furthermore, the company anticipates the comps trend for this brand to improve in fiscal 2017.

The Downside Story

Of late, Abercrombie has been struggling in the hands of a troubled retail sector as consumers are shifting to online shopping, which has led to sluggish store and mall traffic. Like many other retailers, this has been heavily weighing upon the company’s performance. In addition, lack of efficient control and incompetent marketing for its products remain potent challenges.

This led the company to post earnings and sales misses in four of the trailing five quarters. In fact, it delivered an average negative earnings surprise of 26.2% in the trailing four quarters.

Moreover, the company’s top line and the bottom line declined year over year in the fiscal first quarter. The decline in the top line primarily stemmed from a tough retail environment characterized by heightened promotional activity and soft comps. Going forward, comps are expected to remain challenging, while gross margin is anticipated to remain pressurized during the second quarter. Furthermore, currency headwinds are likely to hurt sales and operating income in fiscal 2017.

Bottom Line

Well, for now, the outcome of Abercrombie’s decision to not sell itself and concentrate on its strategic initiatives remains to be seen. Drawing any conclusions from this decision will be too early. Nevertheless, we note that the Zacks Consensus Estimate of a loss of 33 cents for second-quarter fiscal 2017 has narrowed by a penny in the last seven days.

Meanwhile, you can count on some better-ranked stocks in the same industry, which include The Children's Place, Inc. (PLCE Quick QuotePLCE - Free Report) and J.Jill, Inc. (JILL Quick QuoteJILL - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Children's Place, with a long-term earnings growth rate of 8%, pulled off an average positive earnings surprise of 36.6% in the last four quarters.

J.Jill, with a long-term earnings growth rate of 19.8%, delivered positive earnings surprise of 33.3% in the last reported quarter.

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