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Abercrombie Q4: EPS Smoke and Mirrors
I appreciated this article on ANF as I have a small short position and thought your estimated 4Q EPS was right on. I can't say I exactly followed your FCF analysis, but alternative financial and quantitative models I recently performed on the apparel sub-group leaves ANF near the bottom and confirms your conviction.
Also, having a tween daughter who recently won a math prize and wanted to spend it at ANF allowed me to field test my analysis. While I am happy my daughter has now moved from happy face tees to something else, I can't say that selling ANF tees at 30$ seems to me to be a sound business in this economic environment. The store environment (in Manhattan) was also bizarre as the whole thing is set up to resemble a night club. First, you had to wait outside in a line to get into the store, which seemed strange once you were in the store and realized there was plenty of space for other shoppers. The lights are dimmed very low and loud music is being played while sales clerks on every floor landing are dancing. I notice at a financial blog site that my reaction was similar to about a dozen other parents who also noted that the service was terrible and they were there only because their child had recieved a gift card.
I suppose this last analysis is more intuitive and runs the risk of being "out of it" as my daughter often reminds me, but still...
I also note that my experience and reaction to the store environment was typical of other parents who reported on their experiences at ANF on a financial blog:
Feb 15 09:11 AM
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