Why Abercrombie Shares Got Crushed
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 plummeted 20% today after its quarterly results and outlook missed Wall Street expectations.
So what: The stock has been sluggish in 2013 on concerns over declining traffic, and today's second-quarter results -- income plunged 33% on a revenue dip of 1% -- coupled with downbeat guidance only reinforce that trend. In fact, same-store sales fell 10% over the year-ago period, which include online sales and sales at stores open at least a year, suggesting that its popularity versus the likes of Forever 21 and H&M is declining more quickly than expected.
Management now sees third-quarter EPS of $0.40 to $0.45, well below the average analyst estimate of $1.07. "Despite the challenging environment, we are very pleased by strong growth in our direct-to-consumer business and continued strong growth in China," Chairman and CEO Mike Jeffries reassured investors. "In addition, we are nearing completion of our long-term strategic review, and we are confident that this will provide us with a clear roadmap for sustainable growth in sales, profitability and return on invested capital." Given Abercrombie's rapidly weakening competitive position and the overall sluggishness in teen spending lately, I wouldn't be so quick to buy into that optimism.
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The article Why Abercrombie Shares Got Crushed originally appeared on Fool.com.
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