Abercrombie Shares Popped: What You Need to Know


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of teen-apparel retailer Abercrombie & Fitch (NYS: ANF) jumped 12% today after its full-year outlook topped Wall Street estimates.

So what: While Abercrombie's fourth-quarter profit plunged to $19.6 million from $92.6 million in the year-ago period, a positive full-year outlook suggests that the worst is behind it. The shares have been crushed in recent months on worries over margin-pressuring discounts and spiking costs, but easing cotton prices should help reduce some of those concerns.

Now what: Looking ahead, management expects full-year 2012 EPS of $3.50-$3.75, ahead of the consensus estimate of $3.47 a share. "Our results for the fourth quarter were below our expectations in an extremely challenging environment," CEO Mike Jeffries said. "However, we are confident that we are on track with our long term strategy of leveraging the international appeal of our iconic brands to build a highly profitable, sustainable, global business." With the stock still trading at a P/E premium to rivals such as American Eagle and Gap, however, I'd wait for a much cheaper valuation before betting on that optimism.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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