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Retail Takes Another Hit as Abercrombie & Fitch (ANF) Loses Ground

Posted on Thursday, May 28th, 2020 by Steve Anderson

Retail Takes Another Hit as Abercrombie & Fitch (ANF) Loses Ground

Way back in the dim, dark days of the 1990s, having a piece of clothing from Abercrombie & Fitch (NYSE: ANF) was a status symbol of sorts. The brand was actually featured in some music of the era. While it's lost a little of that cachet since it's still a pretty big deal. Not big deal enough, however, to save it from its most recent round of losses, demonstrating once more that mall-facing stores are taking it on the chin all over.

The Coronavirus Hits Another Company Like a Bus Hits a Watermelon

Abercrombie & Fitch reported lost sales of 34% for the first quarter, and for exactly the reasons you'd expect: mass store closings during the coronavirus panic. The company also cited reduced apparel buying overall from all those people sequestered in their homes, which is actually something we haven't heard quite so much lately.

The causes were sufficient to tank the company's sales, and send Abercrombie & Fitch shares down 6% in the premarket trading session. A bit of a bounce took place as of this writing, but the company is trading around $12.16, still well off yesterday's close of $13.05.

Once Again, the Numbers Tell The Story

The numbers coming out of Abercrombie & Fitch tell a similar story to those of several other firms we've recently heard from, like Foot Locker and Macy's; revenues aren't flat, but losses are still gigantic. The company brought in $485.4 million in revenue this quarter—and this with stores shuttered throughout the planet!—though admittedly, that's down from $734 million at the same time last year. Yet despite nearly half a billion in revenue, the company still posted an adjusted loss per share of $3.29.

Sales were down across all the store's brands; Abercrombie & Fitch itself lost 30%, while its other brand, Hollister, lost 36%. An expanded look at the period ending May 2, meanwhile, told a tale of further losses; expanding to May 2 increased the lost to $244.1 million, or $3.90 per share. Excluding one-time charges, meanwhile, dropped the loss to that slightly more palatable $3.29 per share. No matter how you slice it, though, it's still well below analysts' expectations: Refinitiv consensus was looking at a loss of $1.39 a share, on revenue of $497.3 million.

Keeping the Worst Quiet

In what may be the most telling point of all, there was quite a bit Abercrombie & Fitch just plain old wasn't telling. Same-store sales for the quarter were kept quiet, and both second-quarter and full-year guidance were also kept, mum.

However, as bad as this was, there's still some hope going forward: Fran Horowitz, Abercrombie & Fitch's CEO, noted that about half the company's stores were back up and running, and digital sales posted an impressive increase, up 25% as compared to last year. May is looking like it will produce a further increase, and with the stores coming back on line, second-quarter figures might look up. Additionally, the company is currently holding around $704 million in cash on hand—as well as cash equivalents—and inventory around $427 million, which is down slightly from last year, a full percent down.

The Problem Is Probably Looking Familiar By Now

It's not out of line to add Abercrombie & Fitch to a growing litany of retail woe: Macy's. (NYSE: M) Foot Locker. (NYSE: FL) The Children's Place.(NASDAQ: PLCE)  Even Gamestop. (NYSE: GME) The physical retail operation, especially the mall-facing retailer, is on the ropes. Things were already getting bad before the coronavirus hit, and the pandemic has done little but drive home the fact that physical retail is not what it once was.

That online retail component is what's likely to help a lot of places out. We've already seen as much from Walmart (NYSE: WMT) and Target (NYSE: TGT). They've invested big in their online presence, and that's given them some real advantages. Their ability to stay open during the pandemic certainly hasn't hurt, a testament to their essential nature. Still, businesses all over are likely questioning just where it is they do the most business all over. If it's in a mall, it's not looking too good going forward and may be just the latest step to the end of the mall altogether.

 

Companies Mentioned in This Article

CompanyBeat the Market™ RankCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Walmart (WMT)2.2$124.44-2.0%1.74%23.66Buy$132.53
Target (TGT)2.7$117.70-0.3%2.24%21.80Buy$128.96
Foot Locker (FL)2.9$28.86+1.2%5.54%13.61Hold$34.05
Macy's (M)1.7$6.86+4.6%N/A-0.68Hold$9.65
Childrens Place (PLCE)2.5$35.42-3.3%N/A-10.48Hold$52.64
GameStop (GME)1.0$4.26+4.2%N/A-0.57Hold$4.03

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