Three disappointing sales
reports for teen clothiers
Abercrombie & Fitch
released Thursday indicated flawed fashion rather than a harbinger of falling consumer spending, analysts said.
All three retailers reported same-store sales in May that were lower than analysts expected.
Abercrombie & Fitch was the biggest loser, as its comparable store sales fell 14% compared to last May. Elizabeth Pierce, a retail analyst at
Wedbush Morgan Securities
in Los Angeles, said she had expected a decline in the mid- to high single-digits.
Gap, meanwhile, saw its same-store sales fall 2%, while analysts expected gains of 1% to 4%.
Pacific Sun's same-store sales rose 0.5%, while analysts expected an increase of about 4%, according to Pierce.
"I spent most of the weekend in the mall, and there's lots of traffic," Pierce said. "The truth will come in the second quarter, but it's too early to call a slowdown in consumer spending." She rates Pacific Sun a strong buy and rates Abercrombie a long-term attractive. Her firm has done no underwriting for either company. She does not cover Gap.
Analysts blamed disappointing sales figures on merchandise decisions that were out of tune with the prevailing fashion winds, such as Gap's promotion of all-terrain clothes like three-quarter-length nylon pants and Abercrombie opting for dull colors rather than the bright ones preferred by teenage girls. Analysts don't expect to make significant downgrades in their earnings estimates.
Of the three companies, Pacific Sun was taking the hardest beating, with its shares down 4, or 25%, to 12 1/16 at midday. But according to Richard Jaffe, an analyst at
who covers Pacific Sun and Gap, "Clearly, the Street has overreacted." Jaffe has a buy recommendation on Pacific Sun and Gap. PaineWebber has not served as an underwriter for Pacific Sun or Gap.
Abercrombie's shares were also taking a beating at midday, down 1 3/16, or 12%, to 8 5/8. (Abercrombie & Fitch finished down 1 1/8, or 11%, at 8 11/16.) Gap, however, was treated better by investors. Its shares were down just 3/8, or 1% to 34 5/8. (Gap finished down 3/8, or 1%, at 34 11/16.)