Abercrombie & Fitch Co. (NYSE:ANF) is due to post its Q2 earnings before trading commences on Thursday. What can we expect and how will ANF stock react?
Surprise in Store for ANF Stock?
As with a lot of retailers as of late, Abercrombie & Fitch is struggling with declining in-store traffic as consumers flock to online marketplaces with substantially larger digital presences, such as Amazon (NASDAQ:AMZN). The company will report $45 million USD of pre-tax lease-related charges on the present value of future lease payments, which ANF must pay before it closes down a number of stores. These closures include the company’s flagship SoHo Hollister store in New York and its A&F store in Fukuoka, Japan.
Analysts expect the company to report a loss of $0.52 per share on revenue of $852.32 million for the second quarter. Compare this to the previous year’s quarter when Abercrombie posted a profit of $0.06 per share on revenue of $842.41 million. Interestingly, the company has beaten analyst expectations in each of the last four quarters, so there might be a surprise in store for investors in ANF stock just yet.
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Geopolitical Tensions Impacting ANF Stock
ANF shares could be damaged by the company’s failure to anticipate customer demand and changing fashion tastes. Analysts expect profitability to be hurt by a failure to implement a strategic long-term plan, particularly given the uncertain geopolitical environment. The UK’s decision to leave the EU, which is expected to finally occur in October with no real certainty on the nature of trade deals and tariffs following that departure, could create uncertainty amongst consumers and negatively influence ANF stock.
ANF stock has had a bumpy year, having lost nearly 50% of its value in May alone after posting a narrow loss in its first-quarter earnings. ANF shares are currently valued at $16.52, a long way from its May peak of $30.63, and given analysts’ expectations for Q2 results, it looks like there could be further declines in store.
One positive for Abercrombie & Fitch in the quarter was a June announcement that the company had partnered with Green Growth Brands (CSE:GGB) (OTCQB:GGBXF) to sell CBD products in over 160 stores worldwide. With the CBD market expected to exceed $20 billion USD by 2024, this could be a beacon of hope for ANF stock.
Featured image: DepositPhotos © Rostislavv
