Abercrombie & Fitch

Abercrombie & Fitch (ANF) is an upscale casual wear retailer for young consumers. It’s well known for its sexy ads campaign. See the picture below for its store opening with all the topless male models.

Abercrombie shop front.jpg

Abercrombie ads.jpg

First Trade (probably the last)

I first bought the stock at 18.25 on 1 December 2008 when the market kept tanking during GFC.  I sold out at 26.99 on 3 April 2009 for a net return of 42.6% in 4 months.

Abercrombie - Share Price - 2008-2009
Source: Google Finance.

Why I bought

I found ANF through my own stock screening in late 2008. It was once a retail stock darling with its share price rising from 7.00s per share in 1997 to 70s in 2008, a ten-bagger. When I found it, it was still profitable with total of around 1000 stores. Its share price had fallen from the peak of 80s to the low of 14s in 11 months. It was selling below book value and at mid single digit P/E ratio.

Why I sold

I sold out because I was expecting the next quarterly report to show net loss. The company released monthly operational data, and the first two months of the upcoming quarter was showing losses. Hence, the third month and consequently, the quarterly numbers were just confirmation of financial losses. After the quarter numbers were released, its share price fell to 23s, and I thought I did the right thing to sell earlier.

Hindsight is useless

I realized my mistake when it subsequently rose to 40s in late 2009, 57s in late 2010 and to the high of 77s in mid 2011. After I sold the stock, I did invest the capital into other stocks, but its return would have been better if I just kept ANF longer.

There is no point looking back though, and in hindsight, it’s so easy to buy low and sell high. I did buy ANF at low but did not sell at high. Overall, I was still satisfied with the return given that I was in my first year of investing. If I had kept its stock until now, I would have suffered heavy losses instead.

For the profit, it was not due to skills though. It’s more due to luck. If you bought any stocks during the bottom of GFC, you would have sat on good return when the market bounced. If you still made losses in 2009, then there was really something wrong with your stock picking skills.

Changing Consumer Behavior

Time, obviously, has changed. Brick-and-mortar retailers, including ANF, are suffering heavily since the rise of e-commerce. The biggest blow to ANF is changing consumer behavior. In the past, young consumers wanted to be associated with Abercrombie’s near luxury brand, its logo, being loud, provocative and sexy. Now, the same consumers want the opposite. One thing about fashion retailing is that it’s very hard to predict when and how the consumer behavior can and will change. Therefore, it’s very difficult to buy and hold one fashion retailer for long time, such as 10-20 years.

ANF = CEO

Another interesting thing about ANF is its former CEO, Mike Jeffries. This guy was credited for the rise of ANF from 1990s to mid 2000s. But, the media criticized this same guy for the downfall of ANF after GFC.  Basically, he is like everything ANF is associated with. When consumers liked his style, ANF was thriving. But when consumers departed from his style, ANF was suffering.

When Bloomberg covered ANF and his story, I certainly picked up and read. Mike was married with one child, but would leave the family for another guy. He had a manual on how his flight crew in his private jet should behave, what to wear (underwear included), what to say, which direction to face, etc.  The three dogs would have specific seat in the private jet too. It’s 40+ pages manual by the way. I guess it’s OCD at its finest.

In Memory

I pay attention to ANF’s share price because it’s one of the first few stocks I bought when I started investing. Whenever I walked past Orchard Rd and saw its trendy store, I had a sweet memory. But I’ll never buy its expensive products, not even with the profit I got from its investment. I believe its Singapore store will close down sooner or later.

Restructuring

ANF’s business is suffering now because consumers no longer like the brand. The company is now targeting older consumers and even experimenting with products that do not show its logo or brand name, which was once the reason people bought in the first place. It’s a difficult problem to solve, isn’t it?

Its share price has fallen from 70s in 2011 to 9s now. I don’t know where it will go but I think it will not touch its peak anymore. I will stay away from it for now, probably never buy its stock again.

Abercrombie - Share Price - 2008-2017
Source: Google Finance.
Abercrombie - Financials 10Y - 2017
Source: Morningstar.com
Abercrombie - Profitability 10Y - 2017
Source: Morningstar.com
Abercrombie - Valuation 10Y - 2017
Source: Morningstar.com

 

 

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