THOMSON ONE Business School Edition

THOMSON ONE | Business School Edition

Forecasting the Future Performance of Abercrombie & Fitch

Clothing retailer Abercrombie & Fitch enjoyed phenomenal success in the late 1990s. Between 1996 and 2000, its sales grew almost fourfold, from $335 million to more than $1.2 billion, and its stock price soared by more than 500 percent. More recently, however, the growth rate has begun to slow down, and Abercrombie has had a hard time meeting its quarterly earnings targets. As a result, the stock price in late 2002 was about half of what it was 3 years earlier. Abercrombie’s struggles resulted from increased competition, a sluggish economy, and the challenges of staying ahead of the fashion curve. Since 2002, the company’s stock has rebounded strongly but questions always remain about the firm’s long-term growth prospects. Given the questions about Abercrombie’s future growth rate, analysts have focused on the company’s earnings reports. Thomson One provides a convenient and detailed summary of the company’s recent earnings history, along with a summary of analysts’ earnings forecasts. To access this information, we begin by entering the company’s ticker symbol, ANF, on Thomson One’s main screen and then selecting “GO.” This takes us to an overview of the company’s recent performance. After checking out the overview, you should click on the tab labeled “Estimates,” near the top of your screen. Here you will find a wide range of information about the company’s past and projected earnings.

Discussion Questions

1. What are the mean and median forecasts for Abercrombie’s earnings per share over the next fiscal year? 2. Based on analysts’ forecasts, what is the expected long-term growth rate in earnings? 3. Have analysts made any significant changes to their forecasted earnings for Abercrombie & Fitch in the past few months? 4. Historically, have Abercrombie’s reported earnings generally met, exceeded, or fallen short of analysts’ forecasted earnings? 5. How has Abercrombie’s stock performed this year relative to the S&P 500?