Abercrombie & Fitch Will It Do?

Abercrombie & Fitch (ANF) released results indicating increases in profitability and increases in EPS. The board declared a dividend giving its stamp of approval to the current activities. Wall Street analysts have an overall buy rating on the stock and obviously view the company in a favourable light.

But look at a few items. Comparable store sales for the year just completed in almost all categories are down one or two percent. The low end of the earnings guidance reflects a negative 1% comparable store sales scenario for the first half of Fiscal 2008.

While management can hide behind comments that the economy is difficult, they are spending approximately $420 million in capital expenditures to improve formats and or build new stores. They do not back up the plan with any disclosure about marketing expenditures. The marketing number is combined with general and administrative expenses and is impossible to isolate when reviewing the press release.

Declining same store sales, large Capex and an impossible to find marketing number does not equal transparency.