Abercrombie & Fitch (NYSE: ANF) is probably the best managed specialty retailer of the pack. It's maintained strict discipline on pricing and discounting, unlike many of its peers. ANF has managed to expand its offerings into three separated branded chains selling to different markets.
And the company enjoyed accolades from Wall Street after it beat earnings estimates handily on Feb. 13, reporting earnings of $1.10 per share versus consensus of $1.01 per share. Shares were up over 10% on the news. While I think not much has changed with Abercrombie's operational expertise and its strategy, the current environment is simply not conducive to teens paying big bucks for clothes.
When mom and dad are puling junior our of college in order to pay the mortgage and large retail chains and food sellers are rapidly scaling back their workforces, it is a one-two punch against teen consumption, which rode along nicely on the upswing thanks to the real estate bubble.
Reality will begin to set in shortly for ANF, and other retailers, that this is more of a long-term shift with teen consumption resetting downwards markedly along with the rest of the country. That's bad news for all specialty retailers, but especially bad news for the likes of ANF who have specifically targeted -- and continue to target -- the high end of the market in relative terms.
Alex Salkever is the Director of Research at Piqqem.com, an online stock research tool that taps the "wisdom of crowds" to accurately predict stock prices and market moves.
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