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Casual apparel retailer, Abercrombie & Fitch Co. (ANF - Analyst Report) is scheduled to release its third-quarter 2012 financial results on Wednesday November 14, 2012.

The Zacks Consensus Estimate for earnings stands at 60 cents a share, which reflects an increase of 5.3% from the comparable prior-year quarter reported earnings. The Zacks Consensus Estimate lies between a low of 44 cents and a high of 76 cents. Further, revenue as per Zacks Consensus Estimate is pegged at $1,115.0 million.

Recap of Last Quarter

Abercrombie reported earnings of 19 cents per share for the second quarter of fiscal 2012, modestly beating the Zacks Consensus Estimate of 17 cents per share.

However, the quarterly earnings dipped substantially from the year-ago earnings of 35 cents per share due to higher average unit costs along with increased operating expenses and a higher tax rate.

Driven by robust sales performance in the international market, total sales for the company went up by 4% to $951.4 million from $916.8 million in the prior-year period. However, Abercrombie’s quarterly revenue missed the Zacks Consensus Estimate of $955 million.

Agreement of Estimate Revisions

For the to-be-reported quarter, out of 27 estimates 4 were trimmed and none went in the opposite direction over the last 30 days, whereas in the last 7 days, only 1 estimate was moved downwards with no upward revision.

For the fiscal 2012, 3 estimates went down out of 28 and only 1 was moved up in the last 30 days. During the last 7 days, the story remained the same as for the upcoming quarter, with only 1 estimate going down.

Magnitude of the Estimate Revisions

For the third-quarter of 2012, the Zacks Consensus Estimate for earnings went down by a penny in the last 30 days to 60 cents a share, whereas over the past 7 days the estimate remained unchanged.

The Zacks Consensus Estimate for earnings was again trimmed down by a penny to $2.49 per share in the last 30 days for the fiscal 2012. During the last 7 days no changes were noticed.

Mixed Earnings Surprise History

With respect to earnings surprise, Abercrombie has beaten the Zacks Consensus estimate in the last two quarters out of four. The average for the surprise history stands at negative 13.3% over the last four quarters. Looking at the previous performances, we prefer to remain silent on whether the company will be able to beat the Zacks Consensus Estimate in the upcoming quarters.

Conclusion

Abercrombie is one of the leading specialty retailers of premium casual apparels in the U.S. The company 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.

We believe that the company’s continuous focus on expanding global operations and improving cash flows while maintaining a healthy balance sheet bode well for its future growth. Moreover, the stock is trading at a discount based on our forward earnings estimates, which make it an attractive bet for investment.

Abercrombie operates in a highly fragmented market and competes with national as well as regional players, which may take a toll on its performance. Furthermore, Abercrombie is facing increasing competition from larger retailers, such as Gap Inc. (GPS - Analyst Report), and American Eagle Outfitters Inc. (AEO - Analyst Report).

Consequently, we maintain our long-term ‘Neutral’ recommendation on the stock, which correlates with our Zacks #3 Rank, implying short-term Hold rating on the stock for the next 1-3 months.

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