Abercrombie & Fitch Bid Up On Earnings

Thursday, 27 Oct 2011 01:00 PM

By Tim Plaehn

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Trendy clothing retailer Abercrombie & Fitch (ANF) turned around a poor 2010 first half with strong results in the same period of 2011. Investors have bid up the share price in relation to the company's competitors. Wall Street analysts forecast a continued strong trend in A&F's earnings growth.

Abercrombie & Fitch sells casual clothing and personal items through its Abercrombie & Fitch, Abercrombie Kids and Hollister brands. The company currently has about 1,070 retail stores plus direct to consumer sales operations. The revenue mix is three-quarters in the U.S., one-quarter international sales and just over 10 percent from direct to consumer.

For the first half of 2011, ANF posted earnings of 62 cents per share, up from 9 cents in the first six months of 2010. Total sales increased 22 percent for the first six months to $1.75 billion, up from $1.43 billion.

For the second half of 2011, the analyst consensus estimate is earnings of $2.60 and full year earnings of $3.22. For 2010, the results were $1.94 and $2.05, respectively. The 2012 earnings estimate is $4.70 per share.

Like many a retail company, A&F generates over half of its net income for the year in the calendar fourth quarter.

Shrinking store count

Unlike many companies in the retail space, Abercrombie & Fitch is not growing revenues through a rapidly increasing store count. For fiscal 2011 the company anticipates opening five international flagship A&F stores, two U.S. stores and 40 international Hollister stores. However, by the end of the year, up to 65 U.S. stores will be closed when the leases run out.

From the published growth numbers, the revenue increases for the first six months of the year are due to a 9 percent increase in same-store sales, a 70 percent increase in international sales and a 30 percent increase in direct to consumer sales.

Recent analyst updates on ANF include the analysts at UBS initiating coverage on the stock with a neutral rating and the Piper Jaffray analysts reiterating their overweight rating. With the positive earnings results, ANF has significantly outperformed competitors like American Eagle Outfitters (AEO) and Aeropostale (ARO) over the last year.

The company next reports on Nov. 16.

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