Summary Points:
- ANF pop was short-lived as new team still has a lot of work ahead of it.
- While Abercrombie brand continues to disappoint, Hollister is a bright spot. New CEO comes from Hollister so hopefully she can push the company in the right direction.
- Operating expenses need to be brought down further.
- Stock attractiveness stems from the dividend which appears safe for the time being and high tangible book. If turnaround succeeds then there is significant upside.
Abercrombie & Fitch (NYSE:ANF) released results last week. The stock popped 14% on the news but now, 2 days later, it has lost almost all of those gains. During the quarter revenue declined at the highest rate (-6.9% yoy) while operating margin was significantly lower than last year’s (6.1% vs. 10.9%).
Looking at the income statement, the only positive is that gross margin has held up well. Considering all the talk of discounting in retail and lower prices one may think this was in free fall. If we look at the annual results, gross margin is only 30 basis points lower at 61.0% vs. 61.3% last year.
