The Abercrombie & Fitch Co. (NYSE:ANF) stock price has dropped by around 16% today after it released second quarter results. Its sales performance missed market expectations, with comparable sales for the company increasing by 3% versus the same quarter of the previous year.
Comparable sales at Hollister increased by 4%, while Abercrombie’s comparable sales were up by 2%. The company’s net sales growth of 8% was aided by those increases, as well as a calendar shift.
The company was able to deliver an improvement in the gross profit rate of 110 basis points. It continues to invest in the transformation of its business, which seems to be progressing as planned according to the update.
The US continues to be a key growth area for Abercrombie. The company’s comparable sales in the US increased by 7%, while internationally they were down by 4%.
International sales could be hurt to some degree by the strength of the dollar, which has increased in value in recent months due in part to the rise in US interest rates and fear among investors surrounding the potential for a full-scale global trade war.
A focus on customer service could help to boost the Abercrombie stock price over the medium term in my view. The company is seeking to provide greater value for customers as it seeks to build brand loyalty. This could help to provide it with a competitive advantage which boosts margins and profitability.
Although its stock price is down today after missing sales expectations, its adjusted EPS figure of $0.06 was ahead of investor expectations. Therefore, I believe it was a relatively encouraging quarter for the business that shows it could be moving in the right direction. As a result, I remain optimistic about its long-term growth potential, and feel it could offer a successful turnaround over the coming years.