Abercrombie & Fitch (NYSE: ANF), which like other fashion retailers targeting teens at the mall has taken a beating in the past year, is scheduled to report its fiscal first-quarter 2014 results Thursday, May 29, before the markets open.

Despite a rough 2013, the share price has risen more than 4% in the past few weeks leading into the earnings report. The question investors must ask is whether that is a sign of genuine optimism or the stock is simply poised for a fall.

See also: Tough Retail Earnings Environment


Analysts on average predict that Abercrombie will report revenue for the quarter that declined almost five percent year-over-year to $797.86 million. A net loss of $0.19 per share is also in the consensus forecast. That would be wider than the reported loss of $0.09 per share in the comparable quarter of last year.

The consensus estimate 60 days ago was for a net loss of $0.18 per share. However, note that Abercrombie exceeded consensus EPS estimates by more than 30 percent in the fourth quarter and by more than 15 percent in the period before that.

In the fourth-quarter report, management pointed to strong direct-to-consumer sales and strong results in China and Japan, but admitted that it had much to do to get the company back on track. The share price slumped almost three percent following the report but quickly recovered.

The consensus forecast for the full year so far calls for earnings up more than 18 percent year-over-year to $2.34 per share, but on revenue that is more than three percent lower to $3.98 billion. That EPS estimate is the same as it was 60 days ago.

The Company

Abercrombie & Fitch is an American retailer that offers primarily casual wear for consumers less than 25 years of age at more than 1,000 stores in the United States and internationally. It also markets it apparel and accessories online. Its brands include Abercrombie & Fitch, abercrombie kids, Hollister and Gilly Hicks.

The company was founded in 1892, and its headquarters are in New Albany, Ohio. It is a component of the S&P 500, and it now has a market capitalization of less than $3 billion. Michael S. Jeffries has been chief executive officer since February 1992 but recently was forced to give up his role as chairman of the board.

Competitors include American Eagle Outfitters, which is expected to report declining revenue and break-even EPS for the current quarter, and Aeropostale, from which analysts expect a wider net loss and a double-digit decline in sales, relative to a year ago.

During the three months that ended in April, Abercrombie eliminated its poison pill plan, announced plans to increase spending on marketing and a shift toward a slightly older audience, hired a new chief financial officer and settled a proxy fight with Engaged Capital.

See also: Abercrombie & Fitch Appoints New CFO


Abercrombie has a long-term EPS growth forecast of more than 18 percent, and its forward earnings multiple is less than the industry average price-to-earnings (P/E) ratio. Though the operating margin is in line with the industry average, the return on equity is less than three percent. The dividend yield is near 2.2 percent.

The number of Abercrombie shares sold short, as of the most recent settlement date, represents more than 21 percent of the float. That is the second highest level of short interest so far this year. At the current average daily volume, it would take almost eight days to close out all short positions.

The consensus recommendation of analysts surveyed by Thomson/First Call is to hold shares, and it has been for at least three months. A move to their mean price target would represent a gain of more than 13 percent for shares. However, that consensus target is less than the 52-week high.

At the close on Friday, the share price was about 16 percent higher year to date, though shares have traded most between $36 and $38 since early April. The share price was below the 50-day moving averages for most of that period. Over the past six months, the stock has outperformed the competitors mentioned above, as well as Gap, Urban Outfitters and the S&P 500.

At the time of this writing, the author had no position in the mentioned equities.

Keep up with all the latest breaking news and trading ideas by following us on Twitter.

Related Articles
  1. Economics

    Long-Term Investing Impact of the Paris Attacks

    We share some insights on how the recent terrorist attacks in Paris could impact the economy and markets going forward.
  2. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  3. Economics

    Will Recession Become Reality in 2016?

    Due to creative measures by central banks, there is no telling when a recession will actually occur, but natural economic forces will eventually win.
  4. Investing

    A Surprising Way to Seek Income as Rates Rise

    As an alternative investment, income-seeking investors may turn to dividend-paying exchange traded funds (ETFs) as a way to seek both income and growth.
  5. Stock Analysis

    Will the Stock Rally Last Past Christmas?

    The stock market can't seem to make up its mind. Will investors end up with coal for Christmas or might their wishes come true?
  6. Economics

    The Biggest Oil Producers in the Middle East

    Discover which countries produce the most oil in the Middle East, a region long known for its influence on international petroleum markets.
  7. Economics

    The Biggest Oil Producers in Africa

    Discover which African countries produce the most oil, and learn more about which domestic and international oil companies operate in each country.
  8. Economics

    The Biggest Oil Producers in Latin America

    Find out which countries produce the most oil in Latin America, and learn about some of the biggest oil companies operating in each country.
  9. Stock Analysis

    The 6 Biggest Russian Energy Companies

    Learn about the top energy companies in Russia, a country that holds some of the largest reserves of oil, natural gas and coal in the world.
  10. Stock Analysis

    The Biggest Oil Producers in Asia

    Learn which Asian countries deliver the most crude oil to market, and discover what companies are the biggest producers in each country.
  1. What is the long-term outlook of the metals and mining sector?

    An industry agency council was established by the World Economic Forum in 2014 to serve as an advisory board on the future ... Read Full Answer >>
  2. What is the railroads sector?

    The railroads sector is comprised of publicly traded stocks for companies that operate railroad tracks and/or trains. Railroad ... Read Full Answer >>
  3. Who are Amgen Inc.'s (AMGN) main competitors?

    Biotech giant Amgen Inc (AMGN) bills itself as one of the first biotechnology firms. It was founded in 1980 and has grown ... Read Full Answer >>
  4. What's the most expensive stock of all time?

    Back in late August 2012, Apple’s (AAPL) stock price reached nearly $700 per share. The stock has since split but has yet ... Read Full Answer >>

You May Also Like

Trading Center