Earnings Scorecard: Abercrombie - Analyst Blog
August 23 2011 - 10:45AM
Zacks
Recently, specialty retailer Abercrombie & Fitch
Co. (ANF) announced financial results for the
second-quarter 2011.
Street analysts had nearly a week to ponder on the news. In the
paragraphs that follow, we cover the recent earnings announcement,
subsequent analysts’ estimate revisions as well as the Zacks Rank
and long-term recommendation on the stock.
Earnings Review
Abercrombie & Fitch Co. registered earnings of 35 cents a
share in the second quarter of fiscal 2011, comfortably surpassing
the Zacks Consensus Estimate of 29 cents a share and beating
substantially the prior-year net income of 24 cents per share.
Abercrombie reported double-digit net sales growth of 23% in the
reported quarter, climbing to $916.8 million from $745.8 million in
the prior-year period. Total revenue comprehensively beat the Zacks
Consensus Estimate of $909.0 million.
(Read our full coverage on this earnings report: Abercrombie
Beats Overall)
Agreement of Estimate Revisions
Despite the reasonably good performance in the quarter, analysts
exhibited a mixed sentiment regarding Abercrombie’s 2011 and 2012
outlook. Out of 29 analysts covering the stock, 10 have revised
their estimates for 2011 upward, while 6 moved in the opposite
direction in the last 7 days. For fiscal 2012, out of 29 analysts,
8 analysts have positively revised their estimates with 2 downward
movements in the last 7 days.
Estimates followed a more negative trend for the third quarter
of fiscal 2011. For the current quarter, 3 of the 28 analysts have
increased their estimates over the last 7 days, compared with 10
negative adjustments.
Magnitude of Estimate Revisions
As a result of a relatively bullish sentiment seen among
analysts over the past one week, the Zacks Consensus Estimate for
fiscal 2011 has moved up by 5 cents (from $3.22 to $3.27), while
the 2012 Consensus Estimate increased by 3 cents to $4.70.
Meanwhile, for the third quarter of 2011, the Consensus Estimate
has decreased by 3 cents (from 81 cents to 78 cents) in the last 7
days.
Our Recommendation
Currently, Abercrombie maintains a Zacks #2 Rank, which
translates into a short-term Buy rating. Moreover, our long-term
recommendation on the stock remains Neutral.
Headquartered in Albany, Ohio, Abercrombie operates as a
specialty retailer of premium, high quality casual apparels for
men, women, and kids through a network of 1,069 stores across the
U.S., Canada and Europe. The company has a strong portfolio of
well-established brands, each of which is focused on the unique
characteristics and rapidly changing preferences of its target
customers.
Moreover, Abercrombie is focused on increasing its presence in
international markets in order to drive top-line growth. During
fiscal 2011, the company plans to open new stores in Paris, Madrid,
Dusseldorf, Brussels, Dublin and Singapore under its Abercrombie
& Fitch flagship stores. Besides, the company has planned to
open 40 international mall-based Hollister stores. Such
expansionary policy is sure to drive upside for the stock.
However, Abercrombie does not own or operate any manufacturing
facility and therefore purchases all its merchandise requirements
from independent third parties. The company's operations may be
adversely affected if these manufacturers are not able to ship
orders in a timely manner or meet the company’s quality
standards.
Above all, Abercrombie operates in a highly fragmented market
and competes with national as well as regional players. Besides
competing with larger retailers such as Gap Inc.
(GPS), Abercrombie is facing increasing competition from
value-priced specialty retailers such as Aeropostale
Inc. (ARO) and Buckle Inc. (BKE).
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years
ago that earnings estimate revisions are the most powerful force
impacting stock prices. He turned this ground breaking discovery
into two of the most celebrating stock rating systems in use today.
The Zacks Rank for stock trading in a 1 to 3 month time horizon and
the Zacks Recommendation for long-term investing (6+ months). These
“Earnings Estimate Scorecard” articles help analyze the important
aspects of estimate revisions for each stock after their quarterly
earnings announcements. Learn more about earnings estimates and our
proven stock ratings at: http://www.zacks.com/education/
ABERCROMBIE (ANF): Free Stock Analysis Report
AEROPOSTALE INC (ARO): Free Stock Analysis Report
BUCKLE INC (BKE): Free Stock Analysis Report
GAP INC (GPS): Free Stock Analysis Report
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