Analysis of Abercrombie

Company: Abercrombie & Fitch

ISIN US0028962076 | WKN 903016

Business: An American fashion retail company. The run three fashion retail brands with accessories for men, women and kids and those are: Abercrombie & Fitch, Abercrombie kids and Hollister.

Active: Currently having 997 stores (836 in the US), a few in Canada, Europe and the rest of the world which means they have made cuts since the last analysis.

P/E: 37.6


Here you can find the previous analysis of Abercrombie.

The P/E is unpleasantly high with 37.6 but the P/B is on the other hand surprisingly low with 1.2, still it gives us a clear no go from Graham. The earnings to sales are poor with only 1% and the ROE is equally poor with 3.2%. The book to debt ratio is however excellent with 1.5.
In the last six years they have had a yearly revenue growth of 2.6% which is ok but not more than that and this then also correspond to a motivated P/E of 10 to 14 which means that Abercrombie is today highly overvalued on the market.
They pay a very nice dividend of 3.1% which on the other hand correspond to 115% of their earnings so they obviously try to stop the outflow of investors by increasing the dividend to levels that are long term unsustainable unless the earnings significantly increases (the share price has dropped by almost half since the previous analysis).

Conclusion: Graham gives a very clear no to Abercrombie and for me all the indicators besides from the P/B is also saying no but the P/B is looking in my eyes excellent! There is no doubt that this company is kicked out from the Stocks of Interest list since it no longer fits the criteria there but personally if I would not have had so many other interesting companies to invest in as well as if the dollar would not have been so high then I would not have been so negative to Abercrombie. They make high quality cloths and the store at least here in Berlin is well visited even though I do not like their store concept it seems as if the young people do and they buy few items since the price is so high but they still make those purchases so I do not see the brand as being dead as one get a feeling from the US investors.

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