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Abercrombie (ANF): What's Behind the Stock's Dismal Story?

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Shares of apparel and shoe retailer, Abercrombie & Fitch Co. (ANF - Free Report) plunged to a 52-week low of $11.52 in the very first trading session of calendar year 2017. In fact, this Zacks Rank #5 (Strong Sell) has been displaying a miserable performance for quite some time, owing to foreign currency headwinds, negative earnings surprise history and a tough retail landscape.

Consequently, Abercrombie’s shares have plummeted 56.1% over the past one year, underperforming the Zacks categorized Retail – Apparel/Shoe industry’s decline of nearly 13%.



One of the biggest hurdles in Abercrombie’s path is its significant international presence, which exposes it to major foreign currency risks. The company’s results are being hurt by these headwinds for a while now, and management expects the unfavorable currency fluctuations to weigh upon sales and operating income in the final quarter of fiscal 2016.

Moreover, being heavily dependent on consumer sentiment, Abercrombie remains susceptible to the macroeconomic challenges and volatile consumer behavior. Evidently, the company’s dismal third-quarter fiscal 2016 was mainly a result of soft sales performance, which in turn stemmed from slow traffic trends at the company’s namesake U.S. flagship and tourist location stores.

Delving deeper into Abercrombie's quarterly performance, we note that both sales and earnings declined year over year and lagged the Zacks Consensus Estimate in the quarter. This also marked the company’s third consecutive quarter of earnings miss. Further, underperformance of A&F’s seasonal products weighed on the quarterly gross margin.

Following the quarter, management provided a bleak outlook for fiscal fourth-quarter, where it expects comps to remain challenging, compared to last year. Also, it anticipates foreign currency headwinds to hurt sales and operating income. Together, these factors led to a downtrend in its Zacks Consensus Estimate for the fourth quarter and fiscal 2017, which has slumped 2.84% to 78 cents and considerably to a loss of 3 cents, respectively, over the past 60 days.

ABERCROMBIE Price and Consensus

ABERCROMBIE Price and Consensus | ABERCROMBIE Quote

Apart from the aforementioned factors, stiff competition from other fashion retailers remains a threat for Abercrombie, as the failure to offer high-quality products at competitive prices may dent its overall performance.

Meanwhile, investors can count on better-ranked stocks like The Children's Place, Inc. (PLCE - Free Report) , Christopher & Banks Corporation and Tilly's, Inc. (TLYS - Free Report) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Children's Place has an average positive earnings surprise of 36.3% in the trailing four quarters. The stock, with a long-term growth rate of 10.3%, has seen positive estimate revisions in the last 60 days.

Christopher & Banks, with a long-term earnings per share (EPS) growth rate of 15%, has seen positive estimate revisions for the current fiscal over the past 30 days.

Tilly's long-term EPS growth rate of 13% and solid positive estimate revisions for the current fiscal over the past 30 days help it stand strong in the industry. Moreover, the company has delivered earnings beat consecutively, in the last three quarters.

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