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Bear of the Day: Abercrombie & Fitch (ANF)

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Headquartered in New Albany, Ohio, Abercrombie & Fitch (ANF - Free Report) is a specialty retailer of casual apparel for men, women, and kids. The company was founded in 1892 and made its public debut in 1996.

They operate approximately 709 stores in the U.S. and 189 stores in Canada, Europe, Asia, Australia and the Middle East.

Disappointing Results and Guidance

The company reported its Q4 results on March 2, missing both on the top and bottom lines. Adjusted earnings of 71 cents per share were short of the Zacks Consensus Estimate of 76 cents and down 16% from the same quarter a year ago.

It was the fourth consecutive quarter of miss as well as same store sales decline for the retailer. Net sales fell about 7% year-over-year and lagged the Zacks Consensus Estimate of $1,045 million.

Despite poor performance, shares surged after results, thanks to better-than-expected performance by the Hollister brand.

"Results for the quarter reflect a still challenging and competitive retail environment, however we continue to make progress on our strategic priorities. Hollister, our largest brand, achieved positive comp sales and the Abercrombie brand renewal continues, although it is a work in progress,” said the CEO.

The management expects the environment to remain challenging in 2017, they expect comparable sales to improve for the full year, but to remain challenging for the first half.

Plunging Estimates

Analysts have been cutting their estimates for the company after quarterly results. Zacks Consensus Estimates for the current and next year have plunged to negative ($0.05) per share and $0.00 per share respectively, down from $0.18 and $0.40 per share, 7 days ago. Declining estimates sent the stock back to Zacks Rank # 5.

The Bottom Line

The teen clothing retailer has been struggling with weak traffic and heavy promotional environment. Further, rising trend for shopping online and concerns regarding the impact of border adjustment tax continue to hurt retailers. Abercrombie has taken a number of steps including closing about a third of stores. While the stock has sold off significantly in the past six months, it still remains vulnerable to further decline.

 “Retail—Apparel & Shoes” is currently ranked 224 out of 265 Zacks Industries (bottom 15%) while the sector is ranked 16 out of 16 Zacks Sectors. Investors looking for exposure to this industry could consider Children’s Place (PLCE), which is currently a Zacks Rank #2 (Buy) stock.

More Stocks to Sell. Now.

Beyond our Bear Stock of the Day, today's list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500. 

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