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What You Should Know Ahead of Abercrombie's (ANF) Q3 Earnings

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Abercrombie & Fitch Co. (ANF - Free Report) is scheduled to report third-quarter fiscal 2020 results on Nov 24, before the opening bell. In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 125.8%. However, it has a negative earnings surprise of 6.7%, on average, for the trailing four quarters.

The Zacks Consensus Estimate for third-quarter loss of 6 cents has been unchanged in the past 30 days. However, the loss estimate is narrower than the loss per share of 54 cents reported in the year-ago quarter. For revenues, the consensus mark is pegged at $735.3 million, suggesting a decline of 14.9% from the year-ago quarter’s reported figure.

Key Factors to Note

Abercrombie has been witnessing adverse impacts of the COVID-19 outbreak, which have been hurting the top line. Sales have been primarily impacted by the pandemic-induced store closures and consumers’ altered shopping habits. Consequently, revenues have been dismal across both Hollister and Abercrombie brands.

Abercrombie & Fitch Company Price and EPS Surprise

 

Abercrombie & Fitch Company Price and EPS Surprise

Abercrombie & Fitch Company price-eps-surprise | Abercrombie & Fitch Company Quote

On the last reported quarter’s earnings call, management highlighted that although stores gradually opened in the fiscal second quarter, traffic has been considerably low as compared to the year-ago levels. Moreover, management expected these trends and the pandemic-related uncertainties to persist in the near term. It projected a year-over-year sales decline of 15-20% for the third quarter.

Nevertheless, the company’s efforts to expand digital and omni-channel capabilities are likely to have provided some cushion. The robust online demand has been aiding the otherwise drab top line since the onset of the pandemic. Improved online traffic, conversion and AUR have been the primary drivers for the company’s strong digital sales in the past few quarters. We expect the robust contribution from digital sales to have partly offset the soft in-store sales in the to-be-reported quarter.

Additionally, the company’s cost-containment measures paid off in the last reported quarter, with gross margin expansion and the return to positive bottom-line results. Lower stores and distribution expenses as well as marketing, general and administrative expenses have aided the bottom line. Further, lower promotional and clearance activities have boosted the gross margin. Continued gains from cost-containment efforts are likely to get reflected in the company’s margins and bottom-line results in the fiscal third quarter.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Abercrombie this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Abercrombie has a Zacks Rank #3 and an Earnings ESP of 0.00%.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Central Garden & Pet Company (CENT - Free Report) currently has an Earnings ESP of +57.14% and it sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy Co. Inc. (BBY - Free Report) currently has an Earnings ESP of +14.92% and a Zacks Rank #2.

DICK'S Sporting Goods, Inc. (DKS - Free Report) has an Earnings ESP of +16.18% and a Zacks Rank #3 at present.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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