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Factors Likely to Influence Abercrombie's (ANF) Q1 Earnings

Zacks Equity Research

Abercrombie & Fitch Co. ANF is scheduled to report first-quarter fiscal 2020 results on May 28, before the opening bell. Notably, the company has a positive earnings surprise of 9.7%, on average, for the trailing four quarters. However, it reported a positive earnings surprise of 6.5% in the preceding quarter.

The Zacks Consensus Estimate for the first-quarter bottom line has deteriorated to a loss of $1.31 from a loss of $1.24 over the past seven days. Moreover, the company reported a loss of 29 cents in the year-ago quarter. For revenues, the consensus mark is pegged at $498.1 million, suggesting a decline of 32.1% from the year-ago quarter’s reported figure.

Key Factors to Note

Abercrombie has been witnessing adverse impacts of the COVID-19 outbreak, which led to the closure of stores in North America and EMEA. In a bid to lower costs, it has furloughed the majority of associates and temporarily reduced corresponding pay for about 15% of its corporate employees effective Apr 12. Further, management withdrew its first quarter and fiscal 2020 guidance due to the unprecedented impacts of the pandemic.

Apart from these, the company has been witnessing softness in the Hollister brand and international markets for a while now. In this context, uncertainties related to Brexit continue to hurt sales in the U.K. — its largest international market. Moreover, unfavorable foreign currency movements and higher tariffs have been weighing on margins. Adverse movement in foreign currency is also likely to reflect on the company’s first-quarter bottom-line performance.

Nevertheless, Abercrombie’s efforts to expand digital and omni-channel capabilities are likely to have provided some cushion. The company’s investments in mobile, omni-channel and fulfillment have significantly aided the growth of its digital business. In fact, the digital business continued to perform well, backed by robust momentum across brands and geographies. The company’s ‘purchase online, pick up in store’ (POPinS) and ‘order in-store’ capabilities along with increased investments in marketing and loyalty programs bode well. In fact, the company’s online business remains operational amid the pandemic, which is likely to have cushioned the top line to some extent in the to-be-reported-quarter.

Abercrombie Fitch Company Price and EPS Surprise

Abercrombie Fitch Company Price and EPS Surprise

Abercrombie Fitch Company price-eps-surprise | Abercrombie Fitch Company Quote

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Abercrombie this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Abercrombie has a Zacks Rank #3 but an Earnings ESP of -0.64%.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Big Lots BIG has an Earnings ESP of +19.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General Corporation DG has an Earnings ESP of +6.69% and a Zacks Rank #2.

Williams Sonoma WSM has an Earnings ESP of + 264.32% and a Zacks Rank #3.

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