Jeffries has two failed brands on his watch — Ruehl and Gilly Hicks — along with an international expansion that Belus Capital Advisors’ Brian Sozzi believes has been far too aggressive. If any company needed to fix itself away from the bright lights of Wall Street, Abercrombie would be it. Jeffries has to go, and the company must be taken private before anything changes at ANF. This brand is too strong to wade aimlessly.
Meanwhile, ARO stock has dropped by almost a third in 2013 for good reason — its business is in disarray. Its Q3 report produced a loss of 29 cents per share — five cents worse than analyst expectations, along with a 15% decline in same-store sales. In the fourth quarter, it expects to lose at least 24 cents per share, double what analysts were expecting.
The Fly on the Wall reports that BMO Capital Markets sees ARO stock price providing good long-term value. I tend to agree. ARO’s stock hasn’t consistently traded below $10 since 2005. CEO Thomas Johnson has significant experience at several retailers other than ARO, so I wouldn’t be surprised if this teen retailer was making money once again in 2014.
Lastly, there’s American Eagle. AEO stock delivered Q3 earnings December 6, that while bad, were still positive, unlike Aeropostale. Adjusted earnings per share of 19 cents met analyst estimates. In Q4 AEO expects EPS between 26 cents to 30 cents, well below the 39-cent consensus estimate. While it’s currently having a hard time coping with the highly promotional retail environment teen retailers are facing, there are signs its future will brighten. AEO announced in its earnings release that its new chief merchandising officer is Chad Kessler, former head of merchandising for Urban Outfitters’ (URBN) namesake brand who also spent 16 years in various positions with Abercrombie.
Kessler should be a welcome addition. Also lost in the bad news is a 17% increase in same-store sales growth for its online business. In 2012, AEO generated approximately $476 million in e-commerce revenue and looks to do more than $500 million in fiscal 2013. Of the trio, AEO stock looks like the best of the teen retailers for the long haul. With today’s drop, investors should be considering pulling the trigger.
If you’re looking to own one of these teen retailers long-term, the smartest bet in my opinion is AEO stock. Despite moving through some very choppy waters, it has the best business of the bunch.
As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.