There are several reasons to pay attention to what’s happening at Abercrombie, but perhaps InvestorPlace feature writer Dan Burrows’ lede sums up the best one: “Abercrombie & Fitch makes losing money look cool.”
Now that’s impressive marketing. How so?
“Abercrombie stands out by shrinking less than peers,” says the hed on CNNMoney. “Abercrombie & Fitch Co. (ANF) managed to be the star pupil in the teen retailer set with sales that are shrinking much less than those of its beleaguered rivals,” write John Kell and Phil Wahba.
“Much like the collars of teens who still shop there, shares of Abercrombie & Fitch are popping in early Thursday trading,” Forbes’ Maggie McGrath filed at 9:17 a.m. “The retailer posted better-than-expected first quarter earnings results, losing less money than analysts had called for and posting an overall revenue figure that was higher than the Street’s consensus.”
There’s actually more going on at Abercrombie than clever managing of analysts’ expectations, if long-time CEO Mike Jeffries is to be believed. Which is a good thing, because the stock actually finished the day unchanged at $37.14. It’s up more than 16% since Jan.1, however, after a precipitous decline over three years — mirroring results — that ended with Jeffries losing his chairman’s title on Jan. 28.
“We saw significant sequential improvement in our female business, which comped in line with the male business for the first time in many quarters, and in our Abercrombie & Fitch brand, which comped down only slightly for the quarter,” Jeffries said in his opening statement on an analyst’s call transcribed by Seeking Alpha Thursday morning.
One positive note is that Abercrombie is “turning up the lights — and hopefully the sales — at its Hollister apparel chain,” writes the Wall Street Journal’s Andria Cheng. “By getting rid of the trademark storefront shutters at some of its Hollister stores, a traditionally dark and heavily scented chain, Abercrombie aims to convey its willingness to experiment and listen to customers.”
“After Abercrombie's logo-focused apparel fell out of fashion, it has tried to woo back its fickle clientele by expanding its merchandise to include larger clothing sizes for women and items such as shoes, and by lowering prices to combat the intense competition,” reports Reuters’ Maria Ajit Thomas.
“The encouraging thing about the women's top business is that it is improving with a planned, marked decrease in logo wear,” Jeffries said on the post-earnings call.
“The blinds have come off the Abercrombie windows in favor of displays and mannequins showcasing the clothing,” writes Bloomberg’s Lindsey Rupp. “The chain has updated its merchandise, too. It has introduced black clothing, added larger sizes and will roll out a ‘classic fit’ T-shirt online that’s looser than the company’s standard muscle-style shirt.”
“At Hollister, its biggest business by far,” it’s also “playing music less loudly, and lowering prices,” report Kell and Wahba. “But Hollister still has a long way to go, with comp sales down 7%. And overall company gross margin shrank a huge 3.7 percentage points to 62.2% of sales because of higher promotions.”
“They made some substantial improvements to their fashion,” Piper Jaffray analyst Stephanie Wissink tells Bloomberg’s Rupp. “They’ve done a good job of making the merchandise presentation more impactful. They’ve made it more of a bold statement.” She rates the stock a buy.
Other analysts are not quite so optimistic about the market, even as they see progress in Abercrombie’s merchandising.
After citing a number of positives it sees — led by “better fashion content and lower product prices” — and with a price estimate that’s “about 10% ahead of the market price,” the MIT engineers and Wall Street analysts at Trefis Team still concluded in a Forbes piece Wednesday that “we may not see a significant improvement in Abercrombie’s results in the near future” and “the impact of these factors might not be strong enough to pull Abercrombie out of its slump.”
Concludes InvestorPlace’s Burrows about investors’ early reaction to Abercrombie’s narrower-than-forecast loss: “It won’t last,” what with nasty economic forces such as “sluggish employment growth” likely to continue to weigh down consumer spending.
Said Jim Cramer on his “Lightning Round” Wednesday before the results were announced; “Why do we need to own ANF? Why do we take that beating? Why take that self-inflicted pain?"
When you’re talking about teens, doesn’t that go with the territory?