Abercrombie Earnings Miss: Which Competitors Are Taking Away Their Customers?

Abercrombie Earnings Miss: Which Competitors Are Taking Away Their Customers?

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Abercrombie & Fitch's stock plunged more than 15% on Wednesday after the retailer reported disappointing third-quarter earnings despite an increase in sales.

Bad Press

Maybe Abercrombie and Fitch's (ANF) public request that Michael "The Situation" Sorentino, and others of the Jersey Shore cast, stop wearing their clothes on television (in exchange for what many assumed was ample financial compensation) wasn't a good marketing move after all. And in an "Only in America" turn of events, The Situation countered with a $4 million lawsuit on Tuesday.

"Sorrentino claims that the retailer never actually offered to pay him, and then went on to launch clothes exploiting his trademarked phrase "G.T.L.," an acronym for gym, tan, laundry, and "Fitchuation," a distortion of his nickname," reports CNN Money.

While we're at it, I believe it's plausible the store's assault on the senses through dark lighting, loud music and heavy reek of cologne (detectable from blocks away) may be creating a forcefield sufficient enough to keep even the most determined parent from picking out a pair of skinny jeans for their darling tween.

Financial Breakdown

The company earned $50.9 million, or 57 cents a share, in the quarter ended October 29th. This is a slight improvement to the $50 million, or 56 cents a share, it earned a year earlier.

This came as a disappointment to analysts who forecast earnings to rise to 71 cents a share. "The results were worse than even the most pessimistic forecast for the company," adds CNN Money.

On a brighter note, sales rose 21% to $1.08 billion, in line with forecasts. Same-store sales increased 7%. But sales at its core Abercrombie & Fitch brand only rose 4% compared to higher gains at its Abercrombie for Kids and Hollister brand stores.

"While the company said it is on track to open international stores, it also reiterated plans to close about 55 to 60 domestic stores as those leases expire, primarily at the end of the year."

Other Retailers

So, which companies are taking away Abercrombie's market share?

For ideas, we collected insider buying data on roughly 80 apparel store stocks. We managed to identify 4 names that have seen significant buying from insider executives over the last six months.

Insiders think these apparel stocks are set for more gains–do you agree?

List sorted by market cap.

 

1. American Eagle Outfitters, Inc. (AEO, Earnings, Analysts, Financials): Operates as an apparel and accessories retailer in the United States and Canada. Over the last six months, insiders were net buyers of 579,634 shares, which represents about 0.35% of the company's 167.85M share float.

 

2. Collective Brands, Inc. (PSS, Earnings, Analysts, Financials): Engages in the wholesale and retail of footwear and related accessories worldwide. Over the last six months, insiders were net buyers of 20,139 shares, which represents about 0.04% of the company's 55.24M share float.

 

3. Charming Shoppes Inc. (CHRS, Earnings, Analysts, Financials): Operates as a specialty apparel retailer primarily for women in the United States. Over the last six months, insiders were net buyers of 35,000 shares, which represents about 0.03% of the company's 100.25M share float.

 

4. Hot Topic Inc. (HOTT, Earnings, Analysts, Financials): Operates as a mall- and Web-based specialty retailer in the United States. Over the last six months, insiders were net buyers of 40,000 shares, which represents about 0.1% of the company's 40.91M share float.

 

 

(List compiled by Eben Esterhuizen, CFA)

 

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