Stocks

Abercrombie And Fitch…Setting Up For A Short

Abercrombie & Fitch (A&F) reporting earnings yesterday results.  Although revenue was down 3% from year-ago, comparable-sales growth was 3%, doubling expectations.  A&F also said sales for 2019 will rise 2% to 4%.  On the news the stock rose more than 20%, its best level since 2016.

According to the CEO, is the company’s ability to reach the customers through mobile devices was instrumental with digital sales topping $1 billion for the full year.  To put things into prospective roughly one-in-three dollars spent at the brand is being spent online.  In addition, customers can purchase items online and pick them up in stores. 

This digital transformation has been crucial as the company moves to smaller, but more efficient stores that require less foot print, which in turn cost less to operate.  In addition, once in the stores, in-store touch screens and tablets are being utilized to give shoppers access to the full range of apparel and accessories.

If you want to compete in retail, it’s all about “knowing the customer.”  What I like about what A&F is doing is really trying to get to know the customer.  For example, Abercrombie opened a pair of college-campus- stores or “learning labs” last fall near Ohio State University and in Los Angeles near the University of Southern California.  In additional they are putting more effort into their loyalty club program which memberships have doubled in the past year.

But despite of all that going on at A&F, I remain bearish on retail due to the “Amazon Effect.”

The Amazon effect is the ongoing evolution and disruption of the retail market, both online and in physical outlets, resulting from increased e-commerce. The name is an acknowledgement of Amazon’s early and continuing domination in online sales, which has driven much of the disruption.

The major manifestation of the Amazon effect is the ongoing consumer shift to shopping online. E-commerce makes it possible for people to shop from home or anywhere else with an internet connection, which means just about everywhere these days. Frequently, they can find the exact items they’re looking for without having to look very hard and can purchase them and arrange to have them delivered with just a few clicks.

Source

Despite a 20% move higher,

I think A&F is getting close to levels for shorting the stock, but that’s just my bias, lets go to the charts. The chart suggests to short price at the daily supply at $27.50, but the better level is at #30.50.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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