Shares of preppy retailer abercrombie and fitch. tumbled Monday amid a widespread market slump as investors continued to worry about consumer spending.
The New Albany, Ohio-based retailer saw its shares drop $2.04, or 6 percent, to $32.21 in midday trading.
Caris & Co. analyst Dorothy Lakner abercrombie and fitch said the retailer's second-quarter results reported Friday were in line with estimates and the company's fashion is improving. That can help justify higher prices, although there are some concessions on pricing by the abercrombie and fitch company, she wrote.
"But this has not yet translated into improving comps (sales), so we don't think the champagne should come out just yet," she wrote to clients in a note Monday.
Consumers are cutting back on spending amid the recession, and focusing on finding bargains. The company, which operates of namesake stores as well as abercrombie and fitch, its children's apparel brand; surf-themed Hollister; and intimate apparel store Gilly Hicks, said Friday it is lowering prices and trying to catch up with fashion trends. It reported a fiscal second-quarter loss for the period ending Aug. 1 and its third-straight quarter of double-digit sales declines.
Lakner said the company has its work cut out domestically, since it must close underperforming stores and improve productivity in ones that stay open. She said it must do this while it expands overseas. The company is closing the Ruehl line, its store focused on handbags and other accessories, and cutting jobs.
UBS analyst Roxanne Meyer said the U.S. store base is "mature" and likely to see "meaningful" store closures/reloations. The abercrombie and fitch and its children's' apparel brand are likely to see store closings, she wrote, which "could help make the brands feel less mass/more unique."
She told clients in a note Monday the key driver is to have better sales at full price, but that is not yet being seen in the sales.
Meyer cut her fiscal 2009 earnings per share estimate to 74 cents from 85 cents, while Lakner cut hers from 79 cents to 73 cents. Meyer maintained her fiscal 2010 earnings per share estimate at $1.51, while Lakner cut hers by 2 cents to $1.40.
Analysts predict the company will earn 84 cents per share in fiscal 2009 and $1.51 in fiscal 2010.
In midday trading, the Dow fell 159.46, or 1.7 percent, to 9,160.88. Meanwhile, the Standard & Poor's 500 index and the Nasdaq composite index each dropped more than 2 percent.
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