The Wall Street Journal has a bull/bear article (subscription req'd) up about Abercrombie & Fitch (ANF). I don't follow the name too closely so I will assume that the points made on both sides of the argument are plausible.
There was one thing missing from the article that I think is the biggest risk to a stock like this. ANF is up a gazillion whatever percent in the last few years because it has done a great job figuring out what teenagers will buy. Based on history (Wet Seal and Hot Topic come to mind) ANF will stumble at some point and get a fashion trend wrong.
I am very unlikely to know when that will happen (if ever) but anyone that buys this stock faces that risk. This is true of all retailers that cater to narrow markets.
This does not mean you should sell ANF if you own it or short it or even avoid buying it. All stocks or themes you can find have drawbacks and risks. Buyers of teen retailers have this very clear risk to deal with.
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1 comments:
Roger,
One of the first key items to observe, as you already know, in retail stores is the same store sales figures which come out each month. While they may vary month-to-month, they will likely be the first indicator of a cooloing-off of a very hot retail concept.
ANF reported same-store sales growth of 29% in December, 2005, and just last week raised its profit expectations.
However, they are apparently the subject of an informal SEC investigation which has been putting a damper on the stock.
I don't think this particular trend is over yet!
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