Earnings Preview: Abercrombie & Fitch

Abercrombie & Fitch (ANF) is expected to report Q2 earnings before market open Friday, Aug. 15, with a conference call scheduled for 8:30 am ET.

Guidance

Analysts are looking for a profit of 87c on revenue of $855.21M. The consensus range is 84c to 94c for EPS, and revenue of $838.3M to $903.9M, according to First Call. Abercrombie recently reported its July same-store sales decreased 7% and total net sales rose 2% to $303.1M. Based upon lower-than-expected sales, the company expects to report 1H EPS of $1.55.

Analyst Views

Barron's said Abercrombie & Fitch has enjoyed one of the unparalleled records of consistency, especially for a sector "where the fickle nature of its customers makes the occasional merchandising hiccup almost a guarantee." According to Dow Jones, the apparel retailer has recorded 65 consecutive quarters of EPS growth, but Barron's said that, due to July's sales performance, this may not be sustainable. The Wall Street Journal said that while this isn't the first month this year teen retailers have not done as well as expected, July's results caught the industry off guard because the sector has mostly been considered "recession resistant" because of teens' spending, which "typically holds constant in a slow economy".

July's results, which were hurt by the weak dollar, fuel, energy and food prices, as well as the housing and credit crunches, indicate that the economic slowdown "is dealing wider blows". Despite this, the WSJ said Abercrombie has been increasing its prices, which Thomas Weisel analyst Liz Dunn believes the "fringe customer" will go elsewhere for sales.

Next event: Abercrombie & Fitch is expected to release its August sales on September 4.