This week, Talking Numbers looks at the best and the worst of 2013. Today, we focus on Abercrombie & Fitch, one of the worst performing stock in the S&P 500 index.
This year has been a very good year for stocks. The benchmark S&P 500 index is up 25% with about nine out of 10 stocks in that index seeing gains this year.
And then there are the losers. Newmont Mining, Cliffs Natural Resources, Abercrombie & Fitch, Teradata, and Edwards Lifesciences are the five worst performers in the S&P 500 to date. Along with JDS Uniphase, Teradyne and Abercrombie & Fitch will be removed from the index by the end of this week.
(Read more: Facebook to join S&P 500)
According to CNBC contributor Gina Sanchez, founder of Chantico Global, one of those names doesn't have much to look forward to in 2014.
"Of all of those companies, I think Abercrombie & Fitch has the worst kind of problems a company can face – management problems," says Sanchez. "Mike Jeffries has obviously been a very controversial CEO. He's had a lot of p.r. issues."
Earlier in the year, old quotes made by Jeffries in 2006 resurfaced where said the company didn't make larger sizes because such consumers were the "not-so-cool kids" at high schools. This once again caused a firestorm, leading the company last month to promise larger sizes in the future.
For Sanchez, though, Jeffries' problems aren't just relegated to sizing decisions.
"Quite frankly, his business decisions for this company have just been terrible," says Sanchez. "If you look at what he's done, he's overbuilt the US base. This year, Abercrombie & Fitch will close 30% of their stores by year-end, 35% by 2015. That's a huge mistake and a very costly one."
Abercrombie & Fitch isn't the only teen retailer facing problems. Shares in Aeropostale and American Eagle Apparel are both down more than 30% this year as well. Abercrombie & Fitch's positioning hasn't much changed in the face of its target market's changing tastes, notes Sanchez.
"Abercrombie & Fitch has not been able to redefine its reach and its brand," says Sanchez.
"Engaged Capital came out with a letter saying Mike Jefferies has to go," says Sanchez of the investment company that owns 0.5% of Abercrombie & Fitch. "The company stood by him. They have re-signed him. That's a slap in the face to investors. I say you've got to get out of it."
Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson, says Abercrombie & Fitch's stock chart has been dismal for quite some time.
"This stock is exactly where it was over four years ago," says Ross. "That's not a very good track record of performance given what we've seen with the broader markets pushing out to fresh new all-time highs."
Nonetheless, Ross sees some hope for the stock's chart at these current levels.
"The one ray of sunshine: that critical neckline of support at $30," says Ross of the multiple head and shoulder patterns that have taken form over the last several years. Shares closed at $31.72 on Tuesday.
"We've seen sharp rallies off of that neckline support," says Ross. "We could get one again, even though things look extremely bleak here in the short-term. If I owned it – and I thank God that I do not – I would hold it here and wait for that break below $30 before I finally throw in the towel. I would not commit any fresh capital to this name."
And just because a stock is among the worst performers in the S&P 500 one year, that doesn't mean it can't have a better year ahead. For example, Best Buy was down 51.5% in 2012 but is up 248% this year.
"This year's sinners are often next year's big winners," says Ross. "You have to get down to the depths before you can rally and that's what short rallies are made of. If you could hold $30, you might have the makings of a winner here. "
To see more of Sanchez's fundamental analysis and Ross' technical analysis on Abercrombie & Fitch, watch the video above.
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