Today’s news:
• Abercrombie & Fitch (ANF) reported a fourth quarter earnings beat.
• A Note to Newer Investors
Abercrombie & Fitch (ANF – Hold – yield 6.4%) reported fourth quarter 2019 results yesterday (January year end). Non-GAAP adjusted earnings per share (EPS) were $1.31 vs. the $1.24 consensus estimate, and at the top of the range of analysts’ estimates. Comparable store sales rose 1% after rising 3% in the prior year’s quarter, with the same results also extending to the full year.
CEO Fran Horowitz said, “We finished the year on a strong note, with record Black Friday week results contributing to net sales growth and positive comparable sales for the fourth quarter, and for the third consecutive year. Consistent with recent trends, Abercrombie outperformed Hollister and the U.S. outperformed international, which although still lagging registered significant sequential improvement.”
“Recent results reflect the significant progress we have made against our long-term initiatives, with 2019 marking the second full year of our growing while transforming phase. Over the past two years we have delivered a combined 157 new store experiences, reduced gross square footage by 6%, accelerated the rationalization of our flagship fleet and introduced local customer and product-facing teams in the EMEA and APAC regions. We have laid the groundwork, and remain confident in our long-term vision and the global opportunities available to us as we continue to evolve with our customer.”
As previously itemized, the year’s financials were impacted by flagship store exit charges as management continues to reevaluate and redesign the size and presentation in all of their stores. Results for full-year 2020 will inevitably be impacted by economic problems associated with the coronavirus’ effect on the economy.
The company repurchased four million shares of stock in 2019, with 4.6 million shares remaining in the repurchase authorization.
The market reacted with enthusiasm to the earnings report, sending the stock up 9% on March 4, and pulling shares of Designer Brands (DBI – Buy – yield 7.3%) up as well, on the hopes that Designer Brands will also report a great fourth quarter. The stock market is down today, and both of these stocks have given up most of yesterday’s gains. From the perspective of technical analysis, DBI has a more attractive price chart than ANF. It’s normal that a stock that fell a lot, i.e. ANF, would bounce several times at a new support level before recovering. Investors looking for more immediate potential upside should stick with stocks that didn’t fall very far during the correction. The bigger the fall, the longer the stock will need to rest before successfully attempting a rebound.
A Note To Newer Stock Investors
I’d like to reiterate that almost all stocks fall during market corrections, regardless of the quality of the companies or stock valuations. I still get emails that say things like, “Why is XYZ stock down? Isn’t this a good company?”
Please understand that stock market corrections are about market adjustments and reactions to news and economic scenarios. If you own high quality companies that are growing their annual revenues and profits, those companies are not harmed by stock market corrections. Their stocks might be harmed for a while, but the companies themselves are not affected by share prices.