Abercrombie slides, teens push back
Shares of Abercrombie & Fitch (NYSE:ANF) were hammered to the downside following a tough quarter alongside a slew of analyst downgrades. Early in the session shares were down by more than 18% to $38 per share as the broad market surged higher. The company reported earnings of $0.16 per share, a steep 20% decline from the second quarter of last year. On the topline Abercrombie generated $945.7 million in revenues, a modest 1% decline in comparison to the second quarter of last year. Moreover, these results came in drastically lower than the street’s expectations and estimates. Analysts were looking for $0.31 in earnings per share with $1.01 billion.
These results followed the lead of the majority of retailers. Over the last two weeks we have been treated to a glimpse of true economic strength and too say the least it hasn’t been pretty, consumers are pinched with rising expenses and declining real wages. Same-store sales fell 10% during the quarter as a result of dwindling relevance and lower traffic. To break these results down on a geographic basis; same store sales in the United States fell 11% while sales fell 7% within the international segment.
Additionally, the company felt the need to lower its guidance well below analyst consensus estimates. Management believes its business is in a time of turbulence and therefore it needs to project a more realistic number. Abercrombie expects third quarter earnings per share to come in a range of $0.40 to $0.45, well below the $1.06 in earnings per share predicted by analysts.
Following the report some analysts were quick to downgrade the stock as a result of the updated outlook. Janney Capital in particular cut its rating from “Buy” to “Neutral,” and has dropped the company’s price target from $66 to $40. This price target suggests 5.2% upside from the stock’s current price of $38. During the remainder of the week it is expected other analysts will follow in the same footsteps.
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