Abercrombie & Fitch Co. (ANF)

Two reasons: First, they seem a bit overvalued at 20x forward earnings. All economists seem to believe the U.S. will have another jobless recovery, which might mean these estimates are high. Teenagers are going to have a difficult time getting jobs in this economy, which should mean less money to spend of AF clothing. Second, in the long run, it is very difficult to maintain profits on selling overpriced merchandise on brand alone. Certainly it can be done, but it is not easy. And retailers, if they run into a long difficult patch, are usually hit hard given their capital structure.

My only fear is those at the top have been hit the least by the recession, and will recover the quickest, and will start giving their children wads of cash to spend at AF.

Telechart Pick

In this recession, there are struggling apparel retailers all across the country. Then there's Abercrombie & Fitch. The upscale teen retailer has suffered 10 straight months of double-digit same-store-sales declines. In the second quarter of 2009 alone, sales were down an eye-popping 30% across the company's three name outlets: the flagship Abercrombie brand, which has 567 stores; Hollister, a 520-store teen chain; and Ruehl, a 29-store chain for young adults that Abercrombie shut down in June. Abercrombie & Fitch lost $26.7 million, which includes $24.4 million in charges associated with the closing of Ruehl, in the second quarter. During the same period in 2008, Abercrombie scored a $77.8 million profit. "Abercrombie has mismanaged this economic downturn more than any other retailer," says Britt Beemer, CEO of America's Research Group, a retail consulting firm.
Profit for the three months that ended Oct. 31 fell to $38.8 million, or 44 cents per share, or 30 cents per share excluding one-time items. That beat the average expectation of analysts surveyed by Thomson Reuters for adjusted earnings of 20 cents per share.
Revenue fell to $765.4 million, squeaking past analyst expectations of $764.5 million. Expenses fell 16 percent.
Sales in stores open at least a year, a key measure of a retailer's health, dropped 22 percent. This seems like a classic short squeeze run-up,and cannot continue. I will short this stock all the way to the bank. They are not even making enough money to cover their dividend !! Sheesh....... TS

Target demographic (teens) have little money (unemployment) and plenty of other, lower cost choices. Unreasonable P/E

At the end of the day, sales drive value...

The P/E is too high. Almost all retailers are doing badly and this isn't one of the best. The price shot up because they "beat earnings". Even so sales are down and profits are down. The stock price will follow, nowhere to go but down.

Upthumb. Great balance sheet, cash flow and low debt ratio. International growth strong.

What would I know? I look for overvalued retail, commercial, and other hyped stocks to underperform, and they just rocket higher. To me that's a sign of a high short interest. Sooner or later, all stocks price converge with their value.

Its not in for guys to look gay anymore

This teen retailer has not squared prices with the "new normal"

ANF is overpriced, and their stuff is out of style now. They have not changed anything for a long time.

This stock currently represents a prime example of investors overestimating the speed of recovery.

This runaway optimism in retail is unwarranted. Shorting the "hot" clothing retailers.

We might soon find out that although beating diminished estimates, ANF's just reported declining revenues for September might be even worse than they seem, If we find in a few weeks that they've propped up revs with discounts, margins and earnings could be hit hard n this quarter. With a current PE of over 66 and the risk of a hhit to earnings, I think ANF might dramatically underperform in the next 3 - 5 months.

Lametown

i don't have the balls to short them in the "real world," so i'm going to live out my fantasies and do it here on caps. down to the depths of hell with abercrombie and fitch.

Business model is not keeping up with the economic realities of this recession.

Getting close to confirming a rough double top...and the current AND forward P/E are totally bananas. ANF is a 90s relic in the mall...the stock has seen its peak...growth will never be the same again for this business. A short-term underperformer for sure.

There are more desireable retailers other than ANF. consumers are cutting back and don't have the desire they once had to bu luxury products. People looking for a new wardrobe are most likely to flock to stores that have 20%-50% sales going on frequently.