Financial Trading Blog

Stock of the day 02/12/2014 – Abercrombie & Fitch Co



Once upon a time the Abercrombie & Fitch logo was a status symbol, and the company emblazoned its name on every item in its store. Fast-forward to 2014 and the clothing giant is having to distance itself from blatant labelling as teens turn away from the brand.


Wednesday sees Abercrombie & Fitch release its third quarter earnings in the midst of a severe sales slump. In a preliminary Q3 earnings release, the clothing company revealed a dramatic 12% drop in sales, alongside a 10% fall in like for like sales. Overall sales for the quarter fell from $1.03 billion to $911.4 billion, a drop that was well below forecasts.

CEO Mike Jeffries partly blamed these disastrous figures on a large slowdown in European sales that he said had no immediate chance of a turnaround, combined with a fall in year on year foot traffic. These issues were exacerbated by the aforementioned change in trends that led to a decline in sales of heavily logoed Abercrombie & Fitch stock, stock that makes up a large amount of the company’s overall product. This decline follows the overall damage the company suffered when comments from Jeffries, made in 2006, came to light in 2013, with the CEO stating that he didn’t want overweight or unattractive people wearing his clothes.

Unsurprisingly, share prices suffered a similar fate to the company’s sales, falling nearly 17% on November 7th, the day of the announcement, from $31.00 to $29.49, after shares had risen 4.7% the day before to $35.39. This slump was Abercrombie & Fitch’s lowest share price in a year; however prices have since fallen further to $28.12 at close on Monday.

As Abercrombie & Fitch look towards its earnings release on Wednesday, things don’t look great. Credit Suisse downgraded the company to ‘neutral’ from ‘outperform’, as well as decreasing its pricing from $53.00 to $28.00. Oppenheimer also downgraded the company from ‘outperform’, giving it a $30.00 stock target. The huge sales slump indicates the company may struggle to post any growth this quarter, despite its intention to expand into the potentially lucrative Mexican market, as it tries to battle the increasing toxicity of its brand.


Abercrombie Chart

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