Kudos to Abercrombie & Fitch (ANF, $22.93) for a surprisingly solid fourth quarter. The teen-targeting clothier has been struggling for years as expensive labels fell out of fashion, and more recently, fending off the impact of some distasteful comments made by now-former CEO Michael Jeffries. Abercrombie grew same-store sales 5% year-over-year for the holiday quarter in question – its first improvement for that metric in years. Its Hollister stores fared even better, and A&F even managed to beat earnings estimates.
That doesn’t mean Abercrombie has found a permanent solution.
In fact, as far as retail footprint goes, the company still is retreating. Scott Amyx, business-book author and managing partner at venture capital fund Amyx Ventures, says “Abercrombie & Fitch shuttered about 40 store locations in 2017. During the fourth-quarter earnings call, they indicated that they would close as many as 60 U.S. stores in 2018 through expiring leases while adding 11 U.S. full-price store locations.”
One good quarter doesn’t necessarily mean the company is on a new-and-improved trajectory. It’s relatively easy to show improvement when things can’t get much worse. The real litmus test is repeating that growth going forward. And several pros have their doubts.
Forrester analyst Sucharita Kodali, for one, commented about last quarter’s earnings report, “There seems to be momentum right now, but it won’t be long-lived. It’s only been two quarters of growth. And it will not last.” Deutsche Bank analyst Tiffany Kanaga added to the bearish argument, “We’re highly skeptical of Abercrombie’s ability to stabilize its gross profit margin against this competitive mall backdrop.”
