Monday, November 15, 2010

Abercrombie & Fitch Co. (NYSE: ANF): Q3 Earnings Preview 2010

Abercrombie & Fitch Co. (NYSE: ANF) is scheduled to release third-quarter earnings before the opening bell on Tuesday, November 16, 2010. Analysts, on average, expect the company to report earnings of 51 cents per share on revenue of $881.26 million. In the year ago quarter, the company reported earnings of 55 cents per share on revenue of $753.26 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 October 31, 2010, the company operated a total of 1,106 stores. The company operated 340 Abercrombie & Fitch stores, 201 abercrombie kids stores, 510 Hollister Co. stores and 17 Gilly Hicks stores in the United States. The company also operated seven Abercrombie & Fitch stores, four abercrombie kids stores and 27 Hollister Co. stores internationally.

In the preceding second-quarter, the New Albany, Ohio-based company's net income was $19.5 million, or 22 cents a share, copmpared to a loss of $26.7 million, or 30 cents a share, in the comparable period last year. On an adjusted basis, the company earned 24 cents a share in the latest quarter. Revenue increased to $745.8 million from $637.2 million.

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

For the fiscal quarter ended October 30, 2010, the Company reported net sales of $885.8 million, an 18% increase from net sales of $753.7 million last year. 

The teen retailer registered robust comparable store sales growth during the third quarter. Comparable store sales increased 7% for the quarter. For the quarter, total Company direct-to-consumer net merchandise sales increased 32% to $81.4 million. 

The teen retailer's biggest strengths recently have been in direct-to-consumer sales - chiefly online - and international sales. For the third quarter, total Company internctional net sales, including direct-to-consumer net sales, increased 87% to $164.1 million.

The company is expanding rapidly in international markets. During fiscal 2010, Abercrombie expects to open flagship stores in Copenhagen, Denmark and Fukuoka, Japan. 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.

Investors are expected to keenly follow the management's commentary about store traffic and the upcoming holiday season. The Friday after the Thanksgiving holiday marks the start of the crucial holiday shopping period.

In terms of stock performance, shares of the company have gained nearly 33% since the beginning of the year.

Full Disclosure: None.
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