Abercrombie & Fitch Co. ANF, a specialty retailer of premium, high-quality casual apparel, is focused on reviving its brands, enhancing performance and returning to profitable growth.
Pertaining to this, the company has been implementing several measures. These initiatives include improving its leadership team and organizational structure; optimizing store fleet by introducing stores in high-performing markets, while closing the underperforming ones; developing omni-channel capacities and focusing on key merchandise and design processes.
Although these initiatives will not turn around this Zack Rank #3 (Hold) company’s performance overnight, they are certainly expected to direct it toward notable and sustained growth.
Success of the company’s profit-enhancement initiative was evident from its solid second-quarter fiscal 2015 results announced on Aug 26, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate. Though results deteriorated year over year owing to foreign currency headwinds, the company witnessed sequential improvement in comparable-store sales on the back of growth in Hollister and abercrombie kids brands.
However, while management expects these positive trends to continue in the second half of fiscal 2015, it also anticipates the ongoing currency headwinds to linger and weigh on results.
Further, in the face of economic challenges, when teenagers have become less active shoppers, Abercrombie is putting in due effort to stay in the business by expanding its international operations. In fiscal 2015, the company expects to open 15 full-price stores in China, Japan and the Middle East, 6 full-price stores in North America, and 10 outlet stores in the U.S.
We note that a significant portion of Abercrombie’s merchandise is manufactured in Asia, and Central and South America. Further, more than a quarter of the company’s total revenue comes from overseas operations. Accordingly, it is exposed to political, social and economic risks associated with operations in these regions. As a result, any political or social-economic disturbance in these regions can have significant impact on the company’s results.
Key Picks from the Sector
Some better-ranked stocks in the same industry include Boot Barn Holdings Inc. BOOT, Express Inc. EXPR and Destination XL Group, Inc. DXLG. All three stocks carry a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment