Abercrombie & Fitch Co. (ANF), a leading international specialty retailer, reported strong holiday sales as U.S. retailers performed relatively better this year compared to the dismal holiday season of 2008. According to the data released by SpendingPulse, a unit of MasterCard Advisors, U.S. retail sales reportedly increased 3.6% during the period Nov 1 to Dec 24, 2009.

Abercrombie increased its holiday promotions to capitalize on the shopping spree of U.S. customers, and offered up to 50% off on some of its branded merchandise. In addition, discounts of as high as 70% were offered on its Hollister line of products. As U.S. customers have become more price-conscious and bargain for discounted value-for-money items, Abercrombie products have become instant hits recording huge sales.

A critical five-week stretch for retailers has gotten off to a slow start, and news that November sales results missed analyst expectations have added further weight to an already sagging sector. Retail sales reports from the Black Friday weekend have done little to inspire confidence, and now many retailers are reporting that they came up short on analysts “muted expectations” for last month.

The retail industry reported a 0.5% increase in November, far better than last year’s 7.8% drop but well below the 2.1% growth projected by analysts polled by Thomson Reuters. Abercrombie & Fitch (ANF) and Children’s Place Retail Stores (PLCE) reported November slides of 17% and 13%, coming in far below analyst expectations and sending shares tumbling in recent sessions.

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday December 1.

Which Pins Will Fall Next: Altera (ALTR), Xilinx (XLNX), Intel (INTC), Microsoft (MSFT), Novellus (NVLS), Applied Materials (AMAT), AMD (AMD), Cypress Semiconductor (CY), Guess? (GES), Ralph Lauren (RL), VF Corp (VFC), J. Crew (JCG), Phillips-Van Heusen (PVH)

Cyber Monday might have turned out to be better than expected. Online retailers saw a 13.7 percent increase in sales compared to last year, and 24.1 percent more than on Black Friday 2009. The latest data comes from Coremetrics, a Web analytics service used by more than 500 retailers including Abercrombie & Fitch (ANF), Bath & Body Works, Bloomingdale’s, Macy’s (M), Nordstrom (JWN), Office Depot (ODP), and Williams-Sonoma (WSM).

By Bryan McCormick

U.S. stock index futures are roughly flat this morning after very positive trading in Asia but a down session in Eurozone and U.K. markets. Asia rallied on prospects of the United Arab Emirates standing behind its banks and with a view that Abu Dhabi would bail out Dubai.

It is very important to understand a company’s management strategy and management’s ability to create wealth for its shareholders. By using The Applied Finance Group’s (AFG’s) Management Quality score investors have the ability to grade management’s ability to make wealth creating decisions and eliminate wealth destroying firms from your list of constituents. AFG’s Management Quality variable is used as an exclusionary variable to get rid of companies which continue to grow their businesses when they are not profitable (generating negative Economic Margin or negative EM, which is AFG’s way of understanding a firm’s economic profitability).

When business units are unproductive and destroying wealth, management teams should not be looking to grow that business unit and concentrate on the parts of their company that have been creating wealth. Instead, the corporation needs to fix the broken parts of its business first by divesting losers and work on improving profitability to earn the right to expand. The best strategy AFG or any investor likes to see is a very profitable business (generating positive EMs) that grows its assets to maximize its profitability.

Last month, star retail analyst Kristin Bentz shared her excellent framework for picking winners in retail for the holiday season. This morning Kristin followed up with her holiday picks as we head into door-busting Black Friday:

First, I want to note that Ann Taylor (ANN) is down over 10% since I raised a red flag about their discounts when we talked last month.

By Brian Sozzi

Yesterday afternoon I provided a detailed checklist of what investors should be looking for from the spate of retailer earnings reports this week. Let me add a few observations:
* It's important that Target (TGT) had positive customer traffic in 3Q09; it speaks to market share gains amid a new low price consumer message and the prospect for higher margins in 2010 as consumers migrate from the consumables departments to home/apparel.
* Abercrombie & Fitch (ANF) earnings from last Friday were interesting in that management noted they are planning inventory up slightly for the spring. This rate, somewhere around 5.0%, is a glimpse into the still unknowns surrounding consumer spending. Such a low stock of goods in the warehouses and backrooms will lead to volatile comparable store sales results, though potential gross margin upside.
* I am not a big fan of deep discount retail stocks, recently downgrading my rating on 99 Cents Only Stores (NDN). These companies have benefited greatly from increased leverage over their supplier base and transportation partners, not to mention deflationary consumable goods prices. With sector valuation at a premium relative to better situated retailers like Target (TGT) and Wal-Mart (WMT), the deep discount sector appears extended here as gross margin gives back a fair amount of 2009 gains.
* Don't be fooled by these in line and outright conservative EPS guidance outlooks by a few retailers. These companies have planned promotions, driven scant inventory positions, and are poised to maximize margins at the expense of sales generation.
Side note: Just think for a moment when you enter a discount store, what are the first areas that you pass to get to the food aisles? The answer: higher margin departments such as health and beauty aids and apparel. Retailers are a clever, clever bunch.

The Buckle, Inc. (BKE) is a leading retailer of medium to better-priced casual apparel, footwear and accessories for fashion-conscious young men and women. The Company currently operates over 400 stores in 41 states, under the names Buckle and The Buckle.

Buckle markets a wide selection of brand names and private label casual apparel, including denims, other casual bottoms, tops, sportswear, outerwear, accessories and footwear. The Company emphasizes personalized attention to its customers and provides individual customer services such as free alterations, layaways and a frequent shopper program.

Abercrombie & Fitch Co. (ANF), a leading international specialty retailer, reported relatively weak third quarter 2009 results with a net income of $38.8 million or 44 cents per share, compared to a net income of $63.9 million or 72 cents per share in the year-earlier quarter.

The year-over-year decline in results was primarily due to the continued economic downturn plaguing the industry that has resulted in reduced consumer discretionary income and cuts in non-essential spending.

4:10 PM, Nov 13, 2009 --

• DJIA up 73 (0.72%) to 10,270.47.
• S&P 500 up 6.24 (0.57%) to 1,093.48.
• Nasdaq up 18.86 (0.88%) to 2,167.88.

GLOBAL SENTIMENT

F3Q10 Earnings Call

November 13, 2009 8:30 am ET