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Abercrombie Isn't All That Sexy
Not long ago, Abercrombie & Fitch (NYSE:ANF) seemed pretty indestructible. But the sluggish economy brought it, and many of its kin, back down to Earth. Is now the time to load up on shares of the Ohio-based company?
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A Rundown Of Its First-Quarter Earnings Report
Abercrombie has seen better days. As evidence, check out its sales performance. In the quarter, Abercrombie booked net sales of $612.1 million - a 23.5% drop from the more than $800 million it posted in the 13-week period a year ago. The company lost 31 cents per share in the quarter, which is a far cry from the 69 cents per share it earned last year. And last, but certainly not least, the bottom line number was disappointing because Wall Street had been expecting a slimmer loss of just 14 cents. There won't be a lot of happy campers among the analyst community, and we could see some estimates get ratcheted down as a result. (For a quick background, see Analyzing Retail Stocks.)
Same-Store Numbers Hit Hard
Other information in the report wasn't too sexy either. For example, its comparable-store sales were down a whopping 30%. Of course, I wasn't expecting too much on that front given the environment, but that is a pretty big hit. Note that some larger-name retailers, albeit not considered direct comparables per se, reported "less bad" comp results. (For more, see Using Consumer Spending As A Market Indicator.)
Competition's Comps Less Costly
Nordstrom (NYSE:JWN) comes to mind. The Seattle-based store witnessed its Q1 same-store results drop by 13.2%. In that same Q1 release, it offered the following with respect to fiscal 2009: "Nordstrom expects diluted earnings per share in the range of $1.25 to $1.50, increased from the previous range of $1.10 to $1.40."
Then there's Macy's (NYSE:M), which this past week reported its Q1 earnings. Its same-store numbers were down "just" 9%. Incidentally, it reportedly beat expectations in the period, losing 16 cents excluding items, which was better than the 20 cents per share loss that analysts had been expecting.
Gap (NYSE:GPS) is due out with its Q1 earnings May 21. However, earlier this month in conjunction with its April sales numbers, it said, "The company's first-quarter comparable-store sales decreased 8 percent compared with a decrease of 11 percent in the first quarter of the prior year." Analysts are expecting the company to earn 30 cents a share in the period.
Bottom Line
I believe that the retail sector will do well in the long run, and that Abercrombie can ultimately fare well if and when this economy turns itself around. It's just that right now, I can't justify loading up on the stock when the results are so bad and other retailers seem more appealing.
For more, see The Industry Handbook: The Retailing Industry.
IN PICTURES: Retire A Millionaire In 10 Steps
A Rundown Of Its First-Quarter Earnings Report
Abercrombie has seen better days. As evidence, check out its sales performance. In the quarter, Abercrombie booked net sales of $612.1 million - a 23.5% drop from the more than $800 million it posted in the 13-week period a year ago. The company lost 31 cents per share in the quarter, which is a far cry from the 69 cents per share it earned last year. And last, but certainly not least, the bottom line number was disappointing because Wall Street had been expecting a slimmer loss of just 14 cents. There won't be a lot of happy campers among the analyst community, and we could see some estimates get ratcheted down as a result. (For a quick background, see Analyzing Retail Stocks.)
Same-Store Numbers Hit Hard
Other information in the report wasn't too sexy either. For example, its comparable-store sales were down a whopping 30%. Of course, I wasn't expecting too much on that front given the environment, but that is a pretty big hit. Note that some larger-name retailers, albeit not considered direct comparables per se, reported "less bad" comp results. (For more, see Using Consumer Spending As A Market Indicator.)
Nordstrom (NYSE:JWN) comes to mind. The Seattle-based store witnessed its Q1 same-store results drop by 13.2%. In that same Q1 release, it offered the following with respect to fiscal 2009: "Nordstrom expects diluted earnings per share in the range of $1.25 to $1.50, increased from the previous range of $1.10 to $1.40."
Then there's Macy's (NYSE:M), which this past week reported its Q1 earnings. Its same-store numbers were down "just" 9%. Incidentally, it reportedly beat expectations in the period, losing 16 cents excluding items, which was better than the 20 cents per share loss that analysts had been expecting.
Gap (NYSE:GPS) is due out with its Q1 earnings May 21. However, earlier this month in conjunction with its April sales numbers, it said, "The company's first-quarter comparable-store sales decreased 8 percent compared with a decrease of 11 percent in the first quarter of the prior year." Analysts are expecting the company to earn 30 cents a share in the period.
Bottom Line
I believe that the retail sector will do well in the long run, and that Abercrombie can ultimately fare well if and when this economy turns itself around. It's just that right now, I can't justify loading up on the stock when the results are so bad and other retailers seem more appealing.
For more, see The Industry Handbook: The Retailing Industry.
by
Glenn Curtis
Glenn Curtis started his career as an equity analyst at Cantone Research, a New Jersey-based regional brokerage firm. He has since worked as an equity analyst and a financial writer at a number of print/web publications and brokerage firms including Registered Representative Magazine, Advanced Trading Magazine, Worldlyinvestor.com, RealMoney.com, TheStreet.com and Prudential Securities. Curtis has also held Series 6,7,24 and 63 securities licenses.
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