Abercrombie Plummets; Big Price Cuts Hit Margins

[Stocks-to-Watch]

Abercrombie & Fitch (ANF) shares fell 14% in afternoon trading after the teen-focused retailer missed earnings expectations on weak gross margins.

Abercrombie posted 57 cents of EPS, 14 cents worse than expectations. Gross margin fell 360 basis points to 60.1%. The fourth quarter also looks weak, and appears set to disappoint the Street, at least given current analyst expectations.

On the company’s conference call, executives indicated they would start raising prices somewhat next year, which could help boost margins, the Wall Street Journal noted.

One analyst wrote that the dip represents a buying opportunity.

“While we understand the initial spectacular returns are now slowing, we are reiterating our Buy rating on ANF, as we believe there remains robust European growth opportunities and that Asia also could be a burgeoning market; when combined with continued improvements in domestic operations and lower cotton prices as a driver in 2HFY13, we believe the current risk/reward in ANF is enough for us to remain buyers,” wrote Brean Murray Carret analyst Eric Beder.



Original Article Source by Barrons.com