Abercrombie & Fitch Co. (ANF) or Abercrombie & Ditch?

Although Abercrombie has shown stronger growth, American Eagle’s consistent and steady growth rate along with a generous $1.50 special dividend paid late last year made it shine over rivals. American Eagle clearly stands out of the three companies, and I believe it will win market share from rivals, particularly Abercrombie.

Negative publicity

Quotes from by Mike Jeffries, Abercrombie’s controversial CEO, led to wave of negative publicity. Among Jeffries’s statements, “We hire good-looking people in our stores. Because good-looking people attract other good-looking people, and we want to market to cool, good-looking people. We don’t market to anyone other than that.” I believe that Jeffries consistently delivers bad news to the company and now it appears like the final episode for Abercrombie.

After weeks of petitions and bashing from social media, Jeffries met with 18 year-old activist Benjamin O’Keefe, the initiator of the online boycott petition, who suffers from eating disorders. This helped, and although not officially declared by Abercrombie, the company has now considered producing clothes in more sizes.

Foolish bottom line

Abercrombie’s recent wave of bad publicity along with ongoing deterioration of its business means that it is time to separate the stock from your portfolio. On the other hand, American Eagle stands out with its better fundamentals, impressive international expansion and decent dividend yield. Jeffries trashed the Abercrombie brand and it is only a matter of time until American Eagle captures Abercrombie’s lost market share. The company Jeffries will leave behind may even represent a great takeover treasure for American Eagle.

Yaniv Hirsch has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Yaniv is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Abercrombie & Fitch or Abercrombie & Ditch? originally appeared on Fool.com.

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