Abercrombie’s Disappointing Int’l Sales Send Shares Crashing, Stock Worth $64
Source: Google Finance
Teen apparel retailer Abercrombie & Fitch’s (NYSE:ANF) stock crashed by roughly 20% yesterday after the disclosure of third quarter sales results. [1] While this move was likely overdone, the reason for the decline was an update on disappointing overseas sales that showed a slowing trend in Europe that included negative comps for flagship stores. In addition to Europe, Japan and Canada also showed negative comp sales growth. Abercrombie had been riding high since last quarter gaining roughly 37% thanks to its solid international sales outpacing competitors like Aeropostale (NYSE:ARO), American Eagle Outfitters (NYSE:AEO) and Gap Inc. (NYSE:GPS); however, the latest business update has left a big question mark over the consistency of its international strategy.
Check out our complete analysis of Abercrombie & Fitch
- Abercrombie Reports Strong Q2 Beat, Yet Its Stock Tanks 17%: What’s Going On?
- Can A Strong Q2 Performance Help Abercrombie Stock Extend Its 80% Gains This Year?
- What’s Next For ANF Stock After 47% Gains In A Month?
- Is F5 Stock A Better Pick Over Abercrombie After Its Recent 20% Rise?
- Up 70% Since Beginning of This Year, Will Abercrombie’s Strong Run Continue Following Q1 Results?
- Up 5x Over The Last Twelve Months, Where Is Abercrombie & Fitch Stock Headed?
Slowing Oversees Business Casts a Shadow of Doubt over Abercrombie’s International Endeavors
Robust international sales was the primary reason behind the climb of Abercrombie’s stock during last quarter, despite a challenging retail environment marred by industry-wide cost pressures. The company registered a mammoth 74% international growth in last quarter with international sales contributing roughly 25% to the net sales. While the growth rate this quarter was also a decent 56% over last year’s Q3, it is the comparison between growth rates of international sales during the last 3 quarters which provides the real picture.
As evident from the chart above, the growth rate over last quarter has nearly halved from 19% in Q2 to roughly 10% in Q3. This has resulted in a decline in investor confidence on whether or not Abercrombie will be able to consistently maintain its international growth. Additionally, while Europe was leading the baton in comp sales growth last quarter, a slowdown in European business has further added to this concern.
Our price estimate for Abercrombie & Fitch stands at $64, implying an upside of nearly 10% to the current market price.
Understand How a Company’s Products Impact its Stock Price at Trefis
Notes:- Abercrombie & Fitch declares Q3 sales results, Source: Abercrombie’s IR [↩]