How Will Abercrombie & Fitch Perform In Q2 2016?

Abercrombie & Fitch (NYSE:ANF) will announce its second quarter results on August 30, 2016. While a 4.5% fall in revenue is expected, the EPS is estimated to be $-0.19, over a 250% decline from the previous year’s EPS of $0.12.

See our complete analysis for Abercrombie & Fitch

The once popular clothing company is spiraling downwards, with a number of periods of poor sales. Their favored clientele are now moving to fast fashion brands such as Forever 21, Zara, and H&M. While the company has made attempts to reduce its pricing, its clothes are still considered more expensive than the aforementioned companies, which have shortened their runway-to-shelf turnover time to enable them to offer their products at lower prices. ANF has also decided to remove its infamous logo from a majority of its products. While the logos do still exist to some extent, the retailer began phasing them out in 2014. This follows from millennial consumers’ increasing preferences of clothing and accessories without labels or logos, according to a report by Goldman Sachs. While their parents and grandparents derived status from brand names, millennial shoppers would rather spend on food, technology, and vacations.

The company is also focusing more on its direct-to-consumer (DTC) channel to generate higher sales. During 2015, this channel, which includes online and omnichannel sales, accounted for almost a quarter of the company’s sales. This 24% was an increase of two percentage points from a year earlier. The company has undertaken significant investment for its online and omnichannel strategy, with a further $70 million expected in 2016, while at the same time undertaking an aggressive store closure program. The company has started a number of initiatives such as ‘Click and Collect,’ which is ordering online and collecting in the store, which was rolled out in all stores in the US in the first quarter of 2016. It further planned to start shipping from the stores internationally in Canada, and the UK, in the second quarter. A robust international DTC business is being developed, which includes localized websites, local language, and local currency.

The company has also undertaken a massive rebranding initiative after parting ways with its former CEO Michael Jeffries in late 2014, to move away from the reputation it had built in the last decade, because of which the company was also voted the most hated retail brand in February of this year. However, the company is taking efforts to reinvent itself, which was reflected in its men’s lineup, which fused its roots as a hunting and fishing store, with a more contemporary style. Aaron Levine, who joined the company last year as the head of men’s design, had a major role to play in this. Abercrombie released two new casual luxury lines with a refreshed design philosophy, which will be available for retail in July. The company’s women’s line also featured a more sophisticated and classic look, with the advertising campaigns also moving towards something more consumer friendly. The company also used Indian model and activist Neelam Gill, in its last Fall’s campaign.

Have more questions about Abercrombie & Fitch? See the links below:

• How Has Abercrombie & Fitch’s Revenue By Geography Changed Over The Last Three Years?
• Abercrombie & Fitch Plans Changes To Turn Their Business Around
• Who Relies On Debt More; Gap Inc or Abercrombie & Fitch?
• What Is Abercrombie & Fitch’s Revenue & Earnings Breakdown In Terms of Different Operating Segments?
• What Is Abercrombie & Fitch’s Fundamental Value Based On Expected 2015 Results?
• How Has Abercrombie & Fitch’s Revenue Composition Changed In The Last Five Years?
• By How Much have Abercrombie & Fitch’s Revenues & Earnings Grown In The Last Five Years?

Notes:

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap |More Trefis Research