Abercrombie & Fitch Gets Sent to the Sales Rack
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 retailer Abercrombie & Fitch hit the sales rack, down as much as 12% at one point, following the release of its first-quarter earnings results.
So what: For the quarter, Abercrombie delivered a 9% decline in sales, to $838.8 million, from the year-ago period, with the company losing $0.09 in EPS. Comparatively, Wall Street had anticipated revenue of $938 million, and a smaller loss of just $0.05 per share. Even worse, same-store sales slumped 15% -- and that's including direct-to-consumer sales! Management noted numerous inventory issues which haven't allowed them to get the right product to customers. Looking ahead, A&F cut its full-year EPS forecast to a range of $3.15-$3.25 from its own previous guidance of $3.35-$3.45.
Now what: Although management was quick to blame inventory issues, we could also be looking at the negative effects of higher payroll taxes and delayed tax refunds - at least in the U.S. The bigger problem for A&F is trying to save face with disparaging comments made by CEO Mike Jeffries seven years ago that have been rehashed in recent weeks on various social media platforms. At the high-end of the teen pricing range, there could be a lot of potential downside still to come for A&F shareholders if the company doesn't fix its inventory issues very quickly and put out this PR firestorm.
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The article Abercrombie & Fitch Gets Sent to the Sales Rack originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.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 Motley Fool has a disclosure policy.