Image Source: Motley Fool.
Continue Reading Below
What:Shares ofAbercrombie & Fitch dipped 11% last month, falling on Brexit-related concerns and on continuing malaise among teen apparel retailers. As you can see from the chart below, the bulk of Abercrombie's slide came following the June 23 UK referendum to leave the European Union.
So what:The deck was already stacked against Abercrombie and other teen retailers, with recent bankruptcies from American Apparel and Aeropostale. The company posted a wider-than-expected loss in its first quarter, and the Brexit vote only adds further uncertainty to the struggling sector. Abercrombie has two stores in the UK and several more in the continent, in addition to an e-commerce presence, but tariffs, currency issues and other complications could arise from the UK's departure.
The general macroeconomic uncertainty is also problematic for a sector already bleeding revenue.
Now what:Abercrombie's stock fell 13% in the two days following the Brexit vote, but rebounded modestly along with the market comeback, gaining 6% over the rest of the week as investors' worst fears seem to have been assuaged.
The greater concern for Abercrombie investors should be the company's secular woes, as same-store sales fell 4% and EPS loss for the quarter widened from $0.53 to $0.59. On a yearly basis the company remains profitable, with analysts expecting EPS of $0.84 for the year. However, if the retailer's profits continue to compress, it may be forced to cut its quarterly dividend of $0.20 a share.
The uncertainty from Brexit is only one more problem for a retailer struggling to adapt to changing consumer demand.
The article Why Abercrombie & Fitch Co. Shares Dropped 11% Last Month originally appeared on Fool.com.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.