Most of the retail industry players have suffered the blow of snowstorms this holiday season. Harsh weather took a toll on sales as shoppers kept away from malls and preferred to make online purchases. Also, consumer spending has been weak with little customers’ interest to shell out their hard earned money. This made the environment even more promotional since each of them wanted to attract as many customers possible, making competition stiff.
Some of the prominent players of the industry are Guess? (NYSE:GES), American Eagle Outfitters (NYSE:AEO) and Abercrombie & Fitch (NYSE:ANF). These players suffered from the aforementioned factors which led to dismal quarterly results for each of them. Let us analyze them further.
Stock price performance
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- GES 15-Year Financial Data
- The intrinsic value of GES
- Peter Lynch Chart of GES
The stock price performance of the three players was not very impressive. However, Abercrombie & Fitch have posted the highest growth of 42.5% in the last five years. On the contrary, Guess and American Eagle registered declines of 9.3% and 27.3%, respectively.
This means that Abercrombie has been the best pick of all with the most decent returns compared to its peers. The stock price movement of each of the players is a result of change in quarterly revenue of each of them. A look at the revenue growth of the companies will make it easier to understand the price change.
Revenue growth of Guess and American Eagle have been flat. On the other hand, Abercrombie has posted a growth of 29.1% in the last five years. This clearly highlights the reason why Abercrombie has provided better returns over its peers.
The recent quarter
Both American Eagle and Guess reported weak sales in its latest quarter. American Eagle’s top line declined 5% to $646 million as lower mall traffic and higher markdowns hampered overall sales. Therefore, the company plans to close 150 stores over the next two years in order to keep its bottom line in green. The company’s same store sales also decreased a tragic 10%.
Even Guess posted a revenue decrease of 4.8% to $522.5 million, for similar reasons. Also, it made a loss of $2.2 million. However, the retailer plans to streamline its business and control its costs, which should help the bottom line to grow. Also, it plans to expand its footprint in the underdeveloped markets as well as in the e-commerce space. However, both the companies decreased its outlook for the year, which disheartened its investors further.
Not only did Guess and American Eagle, but also Abercrombie experienced a weak holiday season. Its latest quarter too was a lackluster one with the top line drop of 2%. However, the company’s restructuring efforts in its Gilly Hicks business should help in managing its costs efficiently. In fact, the company did a commendable job of narrowing its loss over the last year, despite lower sales. It reported a loss of $0.17 per share as compared to $0.19 per share in the prior year’s quarter. It has also taken measures to improve its inventory and reaffirmed its guidance for the year. Hence, Abercrombie seems to be doing a good job of overcoming hurdles.
Summing it up
Although the entire specialty retail industry is undergoing a difficult phase, Abercrombie has been a great soldier. It has been able to pass through the turbulence and outperform other industry peers. Moreover, its cost management efforts have started paying off. As the weather continues to become favorable, it will be easier for the company to register sales increase. Hence, this player seems to be the best pick of the lot.