NEW YORK (TheStreet) -- Abercrombie & Fitch (ANF) shares fell -4.2% to $35.12 on Wednesday ahead of the release of the retailer's first quarter earnings results before the opening bell on Thursday.
Retailers have been hit by increasingly bad news this earnings season as Sears (SHLD), DSW (DSW) and others have reported weak earnings.
Only 44% of retailers beat analysts earnings estimates this season, while only 39% beat revenue estimates, according to a report by ETF Daily News. Investors don't seem to be confident of Abercrombie's chances of bucking that trend.
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TheStreet Ratings team rates ABERCROMBIE & FITCH as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ABERCROMBIE & FITCH (ANF) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ANF's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.18, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for ABERCROMBIE & FITCH is rather high; currently it is at 63.25%. Regardless of ANF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.08% trails the industry average.
- ANF, with its decline in revenue, slightly underperformed the industry average of 3.4%. Since the same quarter one year prior, revenues fell by 11.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Net operating cash flow has decreased to $405.65 million or 12.73% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ABERCROMBIE & FITCH has marginally lower results.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Specialty Retail industry and the overall market, ABERCROMBIE & FITCH's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: ANF Ratings Report