Summary Points:
- The company appeared back on track as it closed Q4. Two quarters later, this is in question.
- Hollister brand
has done most of the work while Abercrombie brand is still struggling. - Industry-wide decline in same store sales. The problem is not unique to ANF. Comparable sales highly fluctuate.
- The stock trades below tangible book with a 5.5% dividend yield that costs $60m per year vs. LTM OCF of $273m.
Abercrombie & Fitch (NYSE:ANF) is one of several struggling clothing retailers but with decent fundamentals, trading below book and what appears to be a sustainable dividend yield of 5.5%. As we saw though with GameStop (NYSE:GME), the video game retailer, dividend yield can go higher than expected if the stock experiences negative sentiment.
ANF operates 744 stores in the US and 182 internationally. It also sells directly to consumer via its website and related channels. The brands carried are Abercrombie & Fitch, abercrombie kids, and Hollister. As a result of various marketing errors by the previous CEO, Mike Jeffries, the brand was tarnished. Sales declined for the iconic brand and now Hollister is the main brand with over 50% of sales.
