Abercrombie Stock Spikes Higher Despite Disappointing Earnings

By Justin Sharon  AUG 14, 2009 10:10 AM

But with US sales flagging, retailer is making eyes at Europe.


One to watch: Taking a cue from the moody teens it outfits, shares of specialty retailer Abercrombie & Fitch (ANF) have been all over the map this morning after the company swung to a wider-than-expected second-quarter loss. Initially down before the bell on a 23% drop in revenue, it has opened sharply higher.

The company’s premium price points in a recession turned off the collegiate crowd and contributed to a 30% same store sales decline. Abercrombie’s offerings tend to cost an arm and a leg, in contrast to competitors Aeropostale (ARO) and American Eagle Outfitters (AEO). (The alphabet’s opening letter seems to hold real appeal for apparel firms.)

Conditions in the quarter were “very challenging,” according to a CEO who has just landed on a list of America’s best-paid head honchos, notwithstanding a 50% plus share price plunge since ‘07. While its core adolescent demographic is notoriously fickle, international expansion does represent an opportunity for the firm famous for its racy ads. Next up: a new store in Europe’s fashion capital of Milan in October.

What just happened: On the day a guitar great who asked “How high the moon?” passed away, the Dow and S&P rose to new ‘09 closing highs on strength in financials. Cash happened to stay in Vegas, sending shares of Las Vegas Sands (LVS) up over 12%. Earnings at Blockbuster (BBI) were anything but, as the entertainment chain posted a revenue drop of almost 22%.

What’s happening: Japanese equities ended at highs for the year, though Shanghai stocks slid. Europe is trading higher. Here at home stocks have opened in the red. The dollar is at a one week low against the yen. It’s a lucky Friday the 14th for Citigroup (C) after Bank of America/Merrill Lynch upgraded the shares from worst (Underperform) to first (Buy) on its rating scale this morning. Speaking of Merrill, today’s FT notes the broker is in an “aggressive hiring push,” something Nostradamus would have struggled to predict last September. See Why Wall Street's Hiring Binge is Bad News.

What will happen: Where to begin on a jam packed day in economics? Looks like there was something to yesterday’s page one article in The Wall Street Journal about plunging electricity prices; at 8:30AM Eastern the July CPI came in flat, good for its biggest one year drop since the Eisenhower administration. Industrial production rose 0.5% last month, the first increase in this metric since October. Capacity utilization gained 0.4%. And at 9:55 AM the University of Michigan releases its preliminary read on August consumer sentiment.

In contrast its a slow summer Friday on the earnings front with JC Penney (JCP) and ThyssenKrupp the most notable names reporting results. And a generation taught not to trust anyone over 30 gets ready to recall the 40th anniversary of rocking a muddy farm in upstate New York. Assuming it can of course, since they say if you remember the 60’s you weren’t really there.

Happenstance: Talk about putting money where your mouth is. A $1,600 chocolate bar is shortly to hit stores amid the worst economy in memory.

No positions in stocks mentioned.

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