Sell Abercrombie & Fitch (ANF) Stock Before You Lose Your Shirt

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Abercrombie & Fitch (NYSE:ANF) stock, once upon a time, looked quite promising. The teen apparel retailer had build itself an enviable brand that kids loved, and investors loved it too, as the Abercrombie & Fitch logo commanded healthy premiums.

sell abercrombie and fitch anf stockThose days are over.

Off 50% in the past year amidst stagnating sales and the sudden departure of its longtime CEO, the ANF stock price has miserably underperformed the S&P 500, which tacked on 13% in that time.

Abercrombie & Fitch Co.: Retail’s Redheaded Stepchild

ANF stock is affirming its status as one of Wall Street’s weakest links today, after the fiscal fourth-quarter ANF earnings release. Although Abercrombie managed to match consensus earnings estimates at $1.15 per share, revenue is where ANF fell short.

And same-store sales are where it fell woefully short.

Revenues fell 14% to $1.12 million, missing calls for $1.17 billion as U.S. sales fell 10% and international sales dropped 20%.

But it was the same-store sales miss that was more worrisome. SSS is an absolutely crucial metric for retailers: If SSS aren’t growing, companies can’t justify expanding their store count. This is the same problem that rival Aeropostale Inc (NYSE:ARO) currently faces, and it’s an ugly problem to have. ARO’s stock price, like ANF, has also tumbled more than 40% in the last year.

SSS at Abercrombie fell a whopping 10% in the fourth quarter — 6% in the U.S. and an embarrassing 17% internationally — a figure far worse than the 8.2% slump analysts expected. Those numbers indicate current problems for ANF stock and suggest future issues as well.

Falling same-store sales tends to compound on itself because retailers are often forced to close poorly performing locations. Conversely, SSS growth, at its best, is like compound interest: Growing sales in brick-and-mortar locations justify the opening of more locations, which in turn grow SSS year after year. So with every decline in same-store sales, ANF stock and ARO stock miss out on the gravy train.

What’s even worse for the ANF stock price — and what further convinces me the stock is a strong sell — is that American Eagle Outfitters (NYSE:AEO), a direct competitor to Abercrombie, reported a stellar quarter. AEO actually — gasp!grew revenue in the fourth quarter by 3%, a far cry from Abercrombie’s 14% revenue plunge. And SSS at AEO were flat, not negative.

Moreover, Urban Outfitters, Inc. (NASDAQ:URBN), which hasn’t boxed itself into passively printing random numbers on its clothing year after year, is expected to grow revenue in the upper-single-digits for the next few years.

With AEO and URBN proving that it’s possible to grow, even in a time when e-commerce is flipping the retail game on its head, Abercrombie is an easy sell.

As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/03/sell-abercrombie-and-fitch-anf-stock/.

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