One of the biggest movers on Wednesday was Abercrombie & Fitch , whose shares plummeted by almost 30 percent during the day after the company’s first-quarter earnings report scared investors.
The company reported a net loss of 29 cents per share on the first quarter, which was better than what Wall Street had expected, losses of around 44 cents per share. At the same time, revenue’s reported by Abercrombie were at $734 million, again, slightly above estimates.
However, what really spooked analysts was the fact same-store sales were much weaker than expected, with even their flagship locations at Hollister failing to impress. In fact, Abercrombie will be closing three stores, including the Hollister location in New York as well as a high-end store in Milan, Italy, and in Fukuoka, Japan.
Today’s loss pretty much eliminates all the gains the company’s stock has seen in 2019. Prior to this collapse, Abercrombie’s stock had risen almost 25 percent this year, compared to the 12 percent gain across the S&P 500. Share prices even surged over 20 percent on March 6th after reporting strong fourth-quarter earnings, so the stock still is quite volatile for such a major retailer.
However, storms began to brew earlier this month when Wedbush analyst Jen Redding lowered her rating of the stock from it’s previous “neutral” rating to an “underperform.” She warned investors that shares were “priced to perfection” and that a downside of over 20 percent was possible sometime in the future. She ended up being correct just a couple of weeks later.
“The miss at Hollister is a shocker. Shares were rising because everyone thought Abercrombie could work,” she said in an interview with Barrons. She also responded to one theory brought up by someone on Wednesdays earning call, attributing the poor financial results with poor weather conditions. “You don’t know the weather is going to be better and you don’t know that this is entirely weather-related.”
At the same time, the news sent other retail rivals tumbling as well through association. American Eagle Outfitter’s (NYSE: AEO) stock price fell by over 6 percent today, despite the fact that the company had little to report. What is clear, however, is that retail chains across the country have been struggling. With online shopping continuing to dominate, this “retail apocalypse” as it’s been dubbed is truly wreaking havoc on once great companies.
Abercrombie & Fitch Company Profile
Abercrombie & Fitch Co is a specialty retailer that sells casual clothing, personal-care products, and accessories for men, women, and children. It sells direct to consumer through its stores and websites, which include the Abercrombie & Fitch, Abercrombie kids, and Hollister brands. Most stores are in the United States, but the company does have many stores in Canada, Europe, and Asia.
All stores are leased. Abercrombie ships to well over 100 countries via its websites. The company sources its merchandise from dozens of vendors that are primarily located in Asia and Central America. Abercrombie has two distribution centers in Ohio to support its North American operations. It uses third-party distributors for sales in Europe and Asia. – Warrior Trading News
