The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
Abercrombie & Fitch fell out of fashion a number of years ago and the preppy fad hasn’t swung back around for the company. The brand's success was at its peak pre-credit crisis and the share price hasn’t seen those heights since. As the retail sector emerged from the global financial crisis the company’s share price had a large recovery but it still ran out of steam in 2012, and this coincides with the time when the brand started losing popularity.
Abercrombie & Fitch has witnessed 13 consecutive quarters of falling revenue, and the outlook for the new financial year isn’t great as the company described the prospects for first-half of this year as ‘challenging’. Michael Jefferies stepped down as CEO in December, and has yet to be replaced. Given how much sales have declined over the past few years, and not to mention the 77% drop in share price since 2007, Abercrombie & Fitch is clearly taking its time in finding the right person for the job. While the company is leaderless and there are no major changes to the business it is difficult to see the share price rising in the short-term.
When Abercrombie & Fitch reveal its first-quarter numbers, the market is anticipating revenue of $729 million and a loss-per-share of 33 cents. The fourth-quarter numbers came in below market expectations; the revenue was $1.12 billion and the EPS was $1.15, while the market was anticipating $1.16 billion and $1.15 respectively. The company will report its full-year numbers in March, and traders are expecting revenue of $3.53 billion and EPS of 96 cents, and these forecasts equate to a 5.5% drop in revenue and 38% decline in EPS.
Investment banks are bullish on Abercrombie & Fitch, and out of the 36 ratings, seven are buys, 19 are holds, and 10 are sells. The average target price is $21.82, which 6.3% above the current price. Equity markets are very bullish on American Eagle Outfitters, and out of the 31 ratings, 16 are buys, 11 are holds, and four are sells. The average target price is $18.73, which is 14% above the current price.
The number of short positions being taken out on Abercrombie & Fitch has increased by 3.4% since the company announced its full-year numbers in February, and the short interest on the stock is at its highest level in 12 months.
The stock has been in a downward trend since 2011 and the downside target is $17. Any moves higher in the share will encounter resistance at $24.