Friday, May 15, 2009

Abercrombie & Fitch Suspect Dividend Strategy

Abercrombie & Fitch (ANF) announced Q1 results which reflect the terrible retail environment. In all honesty no one was really surprised by the red ink. What is surprising is the continued declaration of the cash dividend in the face of very large losses. ANF’s cash position may appear comfortable but the economic situation will probably cause continued shrinkage.

Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said”.... This year will be a transitional year for us as we continue to focus our efforts on laying the groundwork for our long term success and prosperity by protecting our brands, preserving cash and pursuing our international growth opportunities."

The CEO is trying to have his cake and eat it also. Visibility is poor but ANF has not been successful in reducing costs quickly enough to get margins back in line. That should not generate a dividend for investors.