Abercrombie & Fitch (ANF) Stock: Takes a Dive on Poor Earnings

Abercrombie & Fitch Co. (NYSE: ANF)

Abercrombie & Fitch is having an incredibly bad day in the market today, and for good reason. The company recently released its second quarter results, missing the mark by a wide margin and leading to a key analyst downgrade. Today, we’ll discuss the news, what we’re seeing from the stock as a result, and what we can expect to see from ANF Ahead.

ANF Reports Poor Q2 Results

As mentioned above, Abercrombie & Fitch reported its financial results for the second quarter before the opening bell today. Unfortunately, the report was far worse than expected. Here’s what we saw…

  • Earnings Per Share – In terms of earnings per share, ANF widely missed the mark. During the second quarter, analysts expected that the company would generate a loss in the amount of $0.20 per share. However, the company actually reported a loss in the amount of $0.25 per share, missing the mark by 25%.
  • Revenue – Revenue was a bit more positive for ANF, but it still wasn’t great. During the second quarter, analysts expected that the company would generate revenue in the amount of $782.7 million. However, the company actually reported revenue in the amount of $783.2 million. While this figure did top analyst expectations, it proved a 4% year over year decline.
  • Same Store Sales – Same store sales also proved to be concerning. In the quarter, this figure fell by 4% with the company seeing significant headwinds in the flagship and tourist locations. When it comes to by brand same store sales, the company reported a 2% drop in Hollister and a 7% drop in Abercrombie & Fitch. To make matters worse, the company said that it is expecting for flagship and tourist locations to continue weighing on the company as a whole throughout the rest of the year.

Mizuho Securities Reduces Price Target

Following the release of second quarter results, Miuho Securities weighed in on ANF almost immediately, bringing their price target down in the process. Today, the analyst announced that it has reduced its price target on the stock from $23 per share to $20 per share. In a statement, analyst Betty Chen had the following to offer…

We are lowering our estimates and PT to $20 (from $23) to incorporate the 2Q miss and revised guidance that reflects 2H headwinds from weak traffic, softness in tourism and flagship stores, currency fluctuations, and product adjustments. Although we are encouraged by positive conversion trends and DTC growth, we believe the return to positive same store sales may prove challenging in the near-term given product miscues and brand repositioning that could take longer than expected. Given the plethora of challenges facing the company, we expect shares to remain range-bound.”

What We Saw From The Stock As A Result

Unfortunately, the news above wasn’t positive for ANF. As a result, we’re seeing declines in the value of the stock. Currently (2:06), the stock is trading at $18.10 per share after a loss of $4.86 per share or 21.15%.

What We Can Expect To See Moving Forward

Moving forward, I have a relatively bearish opinion with regard to what we can expect to see from Abercrombie & Fitch. Due to mounting economic concerns, tourism isn’t generating the type of revenue that it used to for the company, and this trend is likely to continue for some time to come. Also, flagship stores aren’t getting the traffic that they once were, proving yet again that style is a rough business. While the company will likely recover at some point down the road, I don’t believe that it will be any time soon.

What Do You Think?

Where do you think ANF is headed moving forward? Join the discussion in the comments below!