American Eagle Outfitters (AEO), Abercrombie & Fitch Co. (ANF): These Apparel Retailers Are Having a Tough Time

The losers
American Eagle Outfitters (NYSE:AEO)’s same-store sales, a key metrics for retailers, nosedived 7% in the second quarter after a 5% decline in Q1. Then it guided for another drop “in the mid- to high-single digits,” according to the company’s post-earnings conference call– that doesn’t sound too good.

Not very long ago, the biggest problem that Abercrombie & Fitch Co. (NYSE:ANF) had to deal with was that its CEO, Mike Jeffries, was very vocal about his aversion to “fat” or “not-so-cool” kids wearing his company’s clothes. Fast forward a few months, and on the heels of surprisingly disappointing second-quarter earnings the apparel retailer appears to be facing a different demographic problem now: teens are ditching Abercrombie & Fitch Co. (NYSE:ANF) and its sister brand Hollister faster than ever.

For Abercrombie & Fitch Co. (NYSE:ANF), same-store sales tanked 10% during the second quarter, leading to worse-than-expected earnings and revenue. Further difficulties are expected going forward. The company wasn’t in a position to offer guidance beyond the third quarter “due to a lack of visibility given recent traffic trends.”

The company is trying to win back customers by opening a new flagship store in Seoul, Korea, this year. It is also planning 20 international outlets under the Hollister brand. However, even if the expansion is successful, it will take time for sales in those markets to have an effect on the bottom line.

Aeropostale Inc (NYSE:ARO)’s earnings also moved south this past quarter. Sales dropped 6% to $454 million, which was actually only marginally lower than analyst estimates. Same-store sales crumbled 15% over the year-ago quarter, even when including e-commerce sales. Looking ahead, management is expecting a net loss in the third quarter in the range of $0.21 to $0.26 per share.

Conclusion
In the short term, investing in these three apparel retailers is like catching a falling knife. Availability of cheaper options has clearly hurt them and given these companies’ outlooks, there might be further downside in the future.

The article These Apparel Retailers Are Having a Tough Time originally appeared on Fool.com and is written by ANUP SINGH.

ANUP SINGH has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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