Wednesday’s Abercrombie Earnings Start a New Chapter for ANF

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Though teen retailer Abercrombie & Fitch Co. (NYSE:ANF) is slated to report last quarter’s results on Wednesday before the market opens, if there was ever an Abercrombie earnings report that current or prospective owners of ANF stock didn’t need to worry about, it’s this one.

Abercrombie & Fitch, ANF stockThat’s not to say earnings don’t matter. Indeed, they matter a great deal, in the grand scheme of things.

In the case of ANF though there’s little doubt that the oddly-timed December exit of controversial CEO Michael Jeffries marks the end of an era — for better or worse.

(But mostly for the better.)

From here it’s all about leaving the past in the past, and rebuilding this once-great fashion name.

Still, the past establishes a baseline for the future. ANF investors might want to get some perspective on where the trailing numbers are and what’s going to improve the numbers for Abercrombie & Fitch in the future.

Abercrombie Earnings Outlook

As of the latest looks, analysts are collectively expecting a profit of $1.15 per share of ANF stock for the final quarter of fiscal 2015, on the heels of $1.17 billion in revenue. Neither compares favorably compared to the year-ago bottom line of $1.13 per share on $1.3 billion in sales.

If the quarterly Abercrombie earnings numbers roll in as expected, the struggling company will have generated $3.79 billion in revenue, and turned a profit of $1.57 per share of ANF stock. Those figures also compare unfavorably to year ago levels of $4.12 billion and $1.91 per share, respectively.

While the retailer has been challenged by competition as well as social gaffes for a few years now, what’s noteworthy to current and prospective owners of ANF stock (and largely unrecognized by them) is that the numbers didn’t start to deteriorate until calendar 2014.

Then again, it doesn’t take very long to start a train wreck either, but there’s nothing that can be done about it once it begins.

What Owners of ANF Stock Need to Watch (or Ask About)

While the numbers tell the story, at this point they’re not the part of the Abercrombie story most shareholders care about. Far more pressing at this time are these three matters:

  1. New CEO: Although Michael Jeffries left his post in early December, the Board of Directors has yet to pick a successor. That caution and patience is merited, as the new chief is inheriting a tough situation. Then again, there’s no assurance the current Board of Directors (with an average age of 68) is interested in a younger replacement that actually understands the current culture of the youth Abercrombie & Fitch is targeting.
  2. New looks, and maybe new prices: Kudos to the company for finally figuring out giant-sized logos and skin-tight T-shirts aren’t what kids are wearing very often these days, but the updated fashion feel of Abercrombie’s merchandise is only part of the needed fix. So-called “fast fashion” — chic clothing that’s cheap enough to be considered disposable — rules the day now. Some of today’s teens even consider needlessly-expensive clothing to be in poor taste — an abrupt shift from the trends of the ’80s and ’90s. Abercrombie & Fitch needs more work on the look and pricing front if the turnaround effort is to fully take hold.
  3. Damage control of its image: Perhaps this is an extension of the first two matters that should be at the top of ANF investors’ minds, but more than anything else, Abercrombie & Fitch went from being “exclusive” to being “downright condescending” in 2014. And it wasn’t just because Michael Jeffries doesn’t know when to shut up. The stores have been tweaking their fashion-makes-you-cool message for years. They got so good at it, in fact, the company alienated a huge chunk of the consumer market that isn’t quick to forgive or forget.

Bottom Line for ANF Stock

Shares of ANF haven’t been easy to own for a while, having fallen more than 50% over the past two years. But investors may want to at least consider the possibility that things could get better for Abercrombie & Fitch from here … if only because they can’t get much worse.

It’s just going to take a lot of convincing from the company that ANF is finally on the right track.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/03/wednesdays-abercrombie-earnings-start-new-chapter-anf/.

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