Tomahawk, WI 8/26/2013 (BasicsMedia) – The world of casual apparel has been dominated by one specialty retailer, namely, Abercrombie & Fitch Co. (NYSE:ANF) for quite some time. It sells casual apparel for men and women as well as children of all age groups. Although it is predominantly a U.S company, where it currently boasts of close to 949 stores, it also has an International wing, which hosts around 99 of its stores. In addition to its U.S and International stores, ANF also sells directly to consumers. In this article, we take a look at why the company’s stock is considered as one of the hottest in the U.S, and whether this is really justified.

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ANF’s Q2 for 2013 Profits Fall

When the company recently announced its latest quarterly results for 2013, it emerged that its fiscal profits had fallen by around 33%. This is significant because it indicates that the results were a huge drop from what the company had estimated. Its same store sales didn’t fare any better, especially in the U.S where there was a major fall as well. With that said, it still managed to post profits in the second quarter of 2013, but there is concern as to whether it will manage to pos results which are favorable to the company and the shareholders in general over the remainder of this year.

What the industry had expected ANF to post as its second quarter of 2013 financial results, and what was actually reported, were quite different. The fall in same store sales within the company’s American segment is quite telling. It appears that very few shoppers were willing to visit ANF’s stores, and fewer still were able or willing to buy the products they came across. The fact that the back to school quarter is close, makes for some not very pleasant moments on the part of ANF. This is a period when sales are expected to fall even further, which does not augur well for the company’s finances.

ANF Lowers Its Expectations

The company does not expect favorable profits in the next quarter, when its financial results will be announced. Consequently, this piece of news has led to the drop in the company’s shares by about 17%. Comparable sales fell by approximately 10%, during a quarter when analysts has predicted that the drop would not be more than 2.5%. Generally, there was also a drop in revenue to $945.7 million, which represents a 1% fall. Analysts had stated that they were looking forward to revenues of around $996.2 million. On the other hand, revenue from international sales increased by around 15%.

ANF has reported that its projections indicate it will get profits in the region of 40-45 cents per share, which is below what Wall Street analysts have estimated at $1.06. ANF believe that their figure is more realistic based on the trends they have currently witnessed, where the number of people visiting their stores has dropped massively. During the second quarter of 2012, ANF announced net income of $17.1 million. But in the second quarter of 2013, the company has announced net income of $11.4 million. With this in mind, I wouldn’t be too quick to say that ANF is one of America’s hottest stocks.

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