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Abercrombie & Fitch (NYSE: ANF) was not hot at all in the first quarter. It's funny. You hear about the recession coming to an end this year, about things getting better, and then you check out some retail stats and you begin to wonder.
Anyway, Abercrombie, which shares space at the mall with names like J.C. Penney (NYSE: JCP), American Eagle Outfitters (NYSE: AEO), Gap (NYSE: GPS), and Aeropostale (NYSE: ARO), saw its top line decline by 24%. Same-store sales for the company's entire operations dropped 30%. Same-store sales at the Abercrombie & Fitch brand itself plunged 26%. Earnings per share took a dive of more than 50% to $0.31. It should be noted, however, that there is a pending non-cash charge that will be added to these results at a later time.
I think Abercrombie posted nothing short of a dreadful, depressing quarter. Just look at the numbers, that's all you need to know. The performance in terms of sales is particularly wretched. It's amazing to me that the stock isn't down further as I write this. I only see a 4% drop in the price in early afternoon trading.
Another thing you have to consider besides the sales debacle is the quality of the gross margin. Abercrombie said that this metric fell 350 basis points! Why the huge difference? Well, blame it on markdowns.
What does Abercrombie need to do? It's in a difficult position. Of course, maybe things can't get worse from here, who knows. The retailer will have to take a good look at its inventory selection and make the necessary adjustments. Abercrombie also should rethink its marketing efforts. Get more traffic into the stores.
I know. Easier said than done. Still, management has to work harder. I mean, the 52-week low on the stock is $13.66. The stock is currently trading around the $26 level, even with today's hit to the shares. A quarter like this makes me wonder why the shares aren't closer to the 52-week low!
I have no interest in buying Abercrombie at the moment. Hopefully we'll see some better data down the line...
Disclosure: I don't own any company mentioned; positions can change without notice.
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Reader Comments (Page 1 of 1)
8-04-2009 @ 3:02PM
KAREN said...
RE: NEW T SHIRTS!!
Has anyone seen the new t shirts they just put out. Suppossed to be funniest t shirts ever? I find them disgusting, and not at all funny! I dont think they have any clue as to how to get customers into their stores. The parents with the money in their pockets sure dont want to spend it making their daughters look like sluts! Come on, get some new marketing people, and think about a sale once in a while, or free shipping, or something more appealing that sleezy tshirts!