Monday, August 16, 2010

Abercrombie & Fitch Co. (NYSE: ANF): Q2 Earnings Preview 2010

Abercrombie & Fitch Co. (NYSE: ANF) is scheduled to release second-quarter earnings before the opening bell on Tuesday, August 17, 2010. Analysts, on average, expect the company to report earnings of 16 cents per share on revenue of $727.68 million. In the year ago quarter, the company posted a loss of 9 cents per share on revenue of $637.26 million.

Abercrombie & Fitch Co., through its subsidiaries, operates as a specialty retailer of casual apparel for men, women, and kids. Abercrombie & Fitch Co. (A&F) through its subsidiaries, is a specialty retailer that operates stores and direct-to-consumer operations selling casual sportswear apparel, including knit and woven shirts, graphic t-shirts, fleece, jeans and woven pants, shorts, sweaters, outerwear, personal care products, and accessories for men, women and kids under the Abercrombie & Fitch, abercrombie kids, and Hollister brands. As of July 31, 2010, the company operated a total of 1,098 stores. The Company operated 339 Abercrombie & Fitch stores, 202 abercrombie kids stores, 509 Hollister Co. stores and 17 Gilly Hicks stores in the United States. The Company also operated six Abercrombie & Fitch stores, four abercrombie kids’ stores and 21 Hollister Co. stores internationally.

Abercrombie's earnings have met or topped analysts' estimates in the past three quarters. In the preceding first quarter, the New Albany, Ohio-based company posted narrower loss of $11.83 million, or 13 cents per share, compared to a loss of $59.24 million, or 68 cents per share, in the year-ago period. Revenue rose 14% to $687.8 million from $601.73 million in the same quarter last year. Analysts, on average, expected the company to report a loss of 14 cents per share on revenue of $678.6 million.

The company has cut prices to lure shoppers and increase market share in highly competitive apparel market. The company has also benefited from aggressive promotions. However, few analysts fear that higher-than-usual discounting coupled with aggressive promotions could put pressure on margin.

The teen retailer registered robust comparable store sales growth during the second quarter. For the quarter ended July 31, 2010, comparable store sales increased 5%. Net sales were $745.8 million, compared to $637.2 million last year. In the month of July, Abercrombie & Fitch had a 7 percent increase in same store sales, beating the 4.1 percent estimate. For the Year-to-date, comparable store sales are up 3% while net sales rose to $1.434 billion from $1.239 billion last year.

The teen retailer's biggest strengths recently have been in direct-to-consumer sales - chiefly online - and international sales. Direct-to-consumer sales rose 51 percent in July, and international sales were up 81 percent.

The company is expanding rapidly in international markets. During fiscal 2010, Abercrombie expects to open flagship stores in Copenhagen, Denmark and Fukuoka, Japan, and a Hollister Epic store on Fifth Avenue in New York. In addition, the company also expects to open approximately 25 international mall-based Hollister stores and one Abercrombie & Fitch store in Canada.

Domestically, it expects to open three A&F stores, two kid’s stores, three Hollister stores and two Gilly Hicks stores.

In terms of stock performance, shares of the company have gained nearly 6.4% since the beginning of the year.

Full Disclosure: None.
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