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Abercrombie (ANF) Q1 Loss Widens Y-o-Y, Sales Beat Estimate
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Abercrombie & Fitch Co. (ANF - Free Report) reported first quarter fiscal 2017 results, wherein top and bottom lines declined from the year-ago quarter. The soft revenue performance can be attributed to the tough retail environment characterized by heightened promotional activity.
The company posted first-quarter adjusted loss of 72 cents that came in line with the Zacks Consensus Estimate but widened from loss of 59 cents reported in the year-ago quarter.
Abercrombie & Fitch Company Price, Consensus and EPS Surprise
Net sales of $661.1 million came ahead of the Zacks Consensus Estimate of $653.3 million but went down nearly 4% year over year. Decline reflects 3% drop in comparable sales (comps). Comps for Abercrombie declined 10%, partially offset by increase of 3% for Hollister. From a geographical view point, net sales had declined 4% in the U.S market and 3% internationally. Direct-to-consumer sales performed well and accounted for 27% of the net sales, advancing 300 basis points (bps).
Following the release, shares of this Zacks Rank #3 (Hold) company surged 9% yesterday, primarily backed by the solid performance of Hollister brand and robust direct-to-customer sales. Lately, the company has been involved in buyout proposals that further raised investor expectations.
Additionally, the company’s strategic capital investments, cost saving efforts, loyalty and marketing programs are gaining traction. These developments have aided Abercrombie to perform better than the broader industry in the past three months. The stock gained 14.5% while the Zacks categorized Retail–Apparel/Shoe industry decreased 17.5%.
For the first quarter, gross profit margin contracted 130 bps to 60.3% due to reduced unit retail, compensated by lower unit cost. Further assortment issues and more than planned promotional expenses hurt gross profit.
Abercrombie reported operating loss amounting to $69.9 million for the quarter, compared to $54.9 million recorded in the year-ago period.
Financials
Abercrombie ended the quarter with cash and cash equivalents of $421.4 million, long-term borrowings of $263.4 million, and shareholders’ equity of $1,180.8 million. As of Apr 29, 2017, inventories were $398.8 million, down nearly 8.5% from the prior-year period. The company continues to focus on tight inventory management policies in order to deliver better sales performance.
Store Update
During the first quarter, the company introduced three new stores in the U.S. including one Hollister and two Abercrombie stores. The company also closed a total of eight stores in the quarter, including seven U.S. and one international store. Store closures comprised of six Abercrombie and two Hollister stores. With this, the company operated 705 stores in the U.S. and 188 stores internationally as at the end of the reported quarter.
During fiscal 2017, the company plans to open two new outlets in the U.S. alongside of seven full-price stores. Additionally, the company plans to shut down 60 stores in the U.S on the basis of lease expirations. Store closure is expected to give Abercrombie more flexibility in terms of cost savings, amid a tough environment, where retailers are facing intense competition from continued shift to online shopping..
Outlookfor Fiscal 2017
The company has made no major changes in their guidance for fiscal 2017 as slated in the previous quarter.
Comps are expected to remain challenging during the second quarter while improvements are expected in the second half of the year. Further, it expects foreign currency headwinds to hurt sales and operating income in fiscal 2017.
Gross margin is expected to remain pressurized during the second quarter and fall slightly from last year’s rate of 61% for fiscal 2017.
For fiscal 2017, the company expects capital expenditure of $100 million.
Best Buy delivered an average positive earnings surprise of 27.7% over the trailing four quarters and has a long-term earnings growth rate of 10.8%.
Burlington Stores delivered an average positive earnings surprise of 26.3% over the trailing four quarters and has a long-term earnings growth rate of 15.9%.
Five Below delivered an average positive earnings surprise of 9.5% for the trailing four quarters and has a long-term earnings growth rate of 28.5%.
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Abercrombie (ANF) Q1 Loss Widens Y-o-Y, Sales Beat Estimate
Abercrombie & Fitch Co. (ANF - Free Report) reported first quarter fiscal 2017 results, wherein top and bottom lines declined from the year-ago quarter. The soft revenue performance can be attributed to the tough retail environment characterized by heightened promotional activity.
The company posted first-quarter adjusted loss of 72 cents that came in line with the Zacks Consensus Estimate but widened from loss of 59 cents reported in the year-ago quarter.
Abercrombie & Fitch Company Price, Consensus and EPS Surprise
Abercrombie & Fitch Company Price, Consensus and EPS Surprise | Abercrombie & Fitch Company Quote
Net sales of $661.1 million came ahead of the Zacks Consensus Estimate of $653.3 million but went down nearly 4% year over year. Decline reflects 3% drop in comparable sales (comps). Comps for Abercrombie declined 10%, partially offset by increase of 3% for Hollister. From a geographical view point, net sales had declined 4% in the U.S market and 3% internationally. Direct-to-consumer sales performed well and accounted for 27% of the net sales, advancing 300 basis points (bps).
Following the release, shares of this Zacks Rank #3 (Hold) company surged 9% yesterday, primarily backed by the solid performance of Hollister brand and robust direct-to-customer sales. Lately, the company has been involved in buyout proposals that further raised investor expectations.
Additionally, the company’s strategic capital investments, cost saving efforts, loyalty and marketing programs are gaining traction. These developments have aided Abercrombie to perform better than the broader industry in the past three months. The stock gained 14.5% while the Zacks categorized Retail–Apparel/Shoe industry decreased 17.5%.
For the first quarter, gross profit margin contracted 130 bps to 60.3% due to reduced unit retail, compensated by lower unit cost. Further assortment issues and more than planned promotional expenses hurt gross profit.
Abercrombie reported operating loss amounting to $69.9 million for the quarter, compared to $54.9 million recorded in the year-ago period.
Financials
Abercrombie ended the quarter with cash and cash equivalents of $421.4 million, long-term borrowings of $263.4 million, and shareholders’ equity of $1,180.8 million. As of Apr 29, 2017, inventories were $398.8 million, down nearly 8.5% from the prior-year period. The company continues to focus on tight inventory management policies in order to deliver better sales performance.
Store Update
During the first quarter, the company introduced three new stores in the U.S. including one Hollister and two Abercrombie stores. The company also closed a total of eight stores in the quarter, including seven U.S. and one international store. Store closures comprised of six Abercrombie and two Hollister stores. With this, the company operated 705 stores in the U.S. and 188 stores internationally as at the end of the reported quarter.
During fiscal 2017, the company plans to open two new outlets in the U.S. alongside of seven full-price stores. Additionally, the company plans to shut down 60 stores in the U.S on the basis of lease expirations. Store closure is expected to give Abercrombie more flexibility in terms of cost savings, amid a tough environment, where retailers are facing intense competition from continued shift to online shopping..
Outlookfor Fiscal 2017
The company has made no major changes in their guidance for fiscal 2017 as slated in the previous quarter.
Comps are expected to remain challenging during the second quarter while improvements are expected in the second half of the year. Further, it expects foreign currency headwinds to hurt sales and operating income in fiscal 2017.
Gross margin is expected to remain pressurized during the second quarter and fall slightly from last year’s rate of 61% for fiscal 2017.
For fiscal 2017, the company expects capital expenditure of $100 million.
Key Picks
Better-ranked stocks in the retail sector include Best Buy Co. Inc. (BBY - Free Report) , Burlington Stores Inc. (BURL - Free Report) and Five Below Inc. (FIVE - Free Report) , each carrying a Zacks Rank #2 (BUY). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Best Buy delivered an average positive earnings surprise of 27.7% over the trailing four quarters and has a long-term earnings growth rate of 10.8%.
Burlington Stores delivered an average positive earnings surprise of 26.3% over the trailing four quarters and has a long-term earnings growth rate of 15.9%.
Five Below delivered an average positive earnings surprise of 9.5% for the trailing four quarters and has a long-term earnings growth rate of 28.5%.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>