Abercrombie & Fitch Co. (ANF)

There seems to be a lot of people against Abercrombie lately. I notice a lot of people on here bashing A&F for not being "cool" anymore. I should hope most Fools have upgraded their wardrope out of college to suits, polos, etc instead of torn up jeans and rebelious t-shirts. This company is still doing things right as far as I am concerned. Hollister has taken over the torch of driving ANF sales like it should. Abercrombie & Fitch should be a premier store with only a limited number of locations. Ruehl seems to have lost its identity a little but should be up to par with the other three concepts by years end. Even abercrombie stores have improved comps. While enough people seem to think that ANF is not cool anymore, the numbers are not showing it.

ANF is doing well in America, but Abercrombie &Fitch is doing exceptionally well overseas. The London store is on pace to match or beat the New York Flagship store. With Europe and Asia screaming for Abercrombie, the growth is not yet over.

Another growth aspect is the fifth concept. I do not know much about the new concept other than it is supposed to be an underwear store. I do not know if it is men's and women's, but it will not cannibalize current store sales. If the company can bring the marketing and brand recognition to thist fifth concept that they have brought to the Abercrombie & Fitch line, then it should be a great success.

Finally, we come to the important part, the numbers. The company has $12/share in assets. If ANF meets the mean EPS estimates for 2007 of $5.23, then the earnings should be worth $89 (5.23 x current P/E of 17). Add the assets and the earnings together, and there is a value of $101. A 23% return over today's share price by next year. Now ANF just needs to deliver.

I think there is too much optimism that this company can adequately compete with its rivals. it made some poor decision earlier, which it has started to correct, but it has lost some of its customer base during that time. If (when) unemployment goes higher, their customers will prefer their rivals even more. Abercrombie's name will be equated to "fool", and not in a good way. As in you "fool" paid too much for that stuff, I hope those extra letters or your shirt are worth it.
Buying fashion for less may be a coming style in this next year.

Abercrombie's appeal has run its course. Its blunders of the past, such as racially insensitive designs, promoting a culture of "beautiful people", and changing from a good albeit expensive store for kids a decade ago to an elitist culture of rich teen snobbery, the brand does not have the same connotations it used to. Their prices have largely remained the same, and even grown, which is not a good indicator in a recession. Potential consumers are realizing that it's easier to pay $30 for a pair of jeans they can beat up themselves than $50 for a pair that Abercrombie has beat up for them.

The combination of these trends, and ANF's "wandering in the dark" leadership, make it unlikely the company will outperform the S&P, and all the more likely its numbers will struggle. And investors will take note.

This is a great company, with tremendous branding in a horrible business sector. All of the negativity is priced into this stock. A major miss cannot beat this down much lower, and any earnings surprise over lowered guidance will yield a nice short term bounce. Once out of this recession, this company will regain its appeal with younger consumers, and this stock will regain its trememdous earnings, growth and lofty PE multiple.

masters of fashion retail. leaders in domain.

Seller of premium apparel in a softening economy
Crowded marketplace with strong competitors such as American Eagle, J Crew, GAP, Aeropostale, etc.
Rich valuations versus peer group
Grossly over-owned by the momentum crowd

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

Strong Sell, VALUE TRAP. Higher inventories (up $100M vs. prior year Q3), Xmas revs (poor store traffic except at Fifth Ave store that analysts see cabbing to work; ha!), really wrong retail concept for next few years, too much capex due to big CEO ego, steadily declining "cash cash", and CFO/Finance Staff turnover. I feel bad for fellow Fools who reco'ed ANF at 60 - then 40 - then 30. (I've been there, friends.)

Just saw analyst on CNBC talking about ANF's cash + investments kitty. Read their 10-Q, kid! Half of investments are Auction Rate Securities that ANF just reclassed into "Level 3" long-term... as in, our CEO will decide how to value them. True cash on hand is about 55% of that.

They upped their Line of Credit from $150M to $450M in April '08. Good move, but not just an exercise in caution. PYr Q3 they didn't use their LoCr; this year's Q3 they drew $100M. (HINT... as in, $100M of ANF's "cash" is $$$ they just borrowed).

MY DCF analysis -- which was quite kind to ANF's projected top-line revs -- shows $16/sh value. Get less kind and ANF is worth $10 to $14.

Seriously, watch out for the lure of their "cash and investments". Half of it is worth less than you think. The "cash cash" is being burned quickly, and they just borrowed $100M in order to flash it.

I like that they refuse to discount. They keep the known quility because of this and when the storm ends and their competiors raise their prices ANF will see their profit fly.

ANF entire image relies on the staffing of good looking young twenty and teenagers. Here in lies the problem. The trend of responsibility in this generation of staff is not improving and the entitlement attitude is growing. The issue will not be one of product but of service and reliability that the staff will struggle to meet. ANF will have to re-invent their model or soon discover that the cost of turn over and employee relations’ situations will be too high of a drain to their profits.

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

US expansion may be about over, except for Hollister (Reuhl is still too new and small, although same store sales are up 30%); but the move into Canada, London England, and soon into Europe may restart growth. High buzz factor, low ad expenditures, high gross margins. This retailer isn't done yet.

Undervalued by 15%

Abercrombie & Fitch has been very prosperous, but even the most prosperous can succumb to economic downturns. The apparel sector is feeling the sting as consumers are spending less on clothing and more on essentials. Given that Abercrombie & Fitch sells clothing at a greater expense, their sales should decrease over the next few quarters as teens opt for trendy clothing at lower prices offered by competitors such as aeropostale. Look for ANF to underperform until consumers have more disposable income.

The last two times I went to the mall, every teenager seemed to wear a "Hollister" T-Shirt. I looked for the source, and I found it: to pay up for your sweet new $15 Tee you need to stand in line at the register for, like, ten minutes. It didn't take me ten minutes to figure out that Hollister is an Abercrombie & Fitch brand. Everything else being good about A&F as far as I can tell, I recommend the stock.

This stock still has room to fall solely based on economic conditions.

ANF always fluctuates within the year to a great deal because of seasonal shoppers, but there really is no fashion company with as much appeal to the current generation of teens (who will be making all the money for the next 30 years) as Abercrombie.

Abercrombie & Fitch (ANF) is a specialty retailer selling men’s, women’s, and kids’ casual and business wear in US. It sells its products under four brand names namely: Abercrombie, Abercrombie and Fitch, Hollister, and RUEH. The company predominantly has mall-based locations, but also offers products through its websites. It has 906 stores in the U.S. and 6 stores in Canada.

The specialty apparel industry is going through significant changes with retailers gradually adopting multi-brand strategy to cater to diverse customers. A multi-brand company like ANF has a huge potential customer base as approximately half of the U.S. population, belonging to the age group of 7-35 years, fits the company’s target group.

The two brands— Abercrombie and Fitch, and Hollister— that targets customers aged between 14-22 years contribute around 86% to the company’s revenue. This target group is expected to outpace the growth of general population by the ratio of 2:1.

Moreover, revenues from the Hollister brand have grown by a whooping 72% in 2005 with same store sales also witnessing a double-digit growth in the past two years. Such galloping success is largely a result of the company’s growing popularity, which is evident from the fact that it has topped the survey of the best place to shop.

Additionally, the company wants to expand its presence in Canada, Europe, and Japan. It is also planning to launch its fifth brand, Concept 5, with significant investments. Being a zero debt company, ANF has given the best returns on equity amongst its peers. Therefore, considering the positive trend in same store sales and rapid increase in new stores with stable balance sheet, the company is expected to fair well.