I initiated a swing trade on Friday, going long ANF. Analysts have started to question if Abercrombie’s brand is exportable. True, Abercrombie over-expanded in Europe at the wrong time. The flagship stores in London and Milan reported significantly lower sales for the quarter. I was not very surprised, but the market was shocked and shares subsequently fell 22%. I see opportunity in what the market has judged to be an awful quarter.
– Sales increased 21% for the quarter yr/yr.
– International sales were up 56% for the quarter yr/yr.
– ANF has a strong balance sheet, hardly any debt and $826M in cash.
Despite what analyst are saying, Abercrombie’s brand is growing in international markets. Currently shares are settled right above a level of support that was tested back in early October. In the near-term I see shares rebounding from this level and rising back above $61.00. In the longer-term, ANF’s estimated intrinsic is around $77.50. My stop-loss on this trade is $57.
Update: Sold out for a small profit.
