Option Trade  Abercrombie & Fitch Co. (NYSE:ANF) Puts
Thursday, November 17, 2016

** OPTION TRADE: Buy the ANF JAN 20 2017 17.000 put at approximately $2.00. Place a pre-determined sell at $4.00.

 Note: No protective stop losses added -- but if you wish to do so make it $0.80. 

by Ian Harvey

Thursday, November 17, 2016

Abercrombie & Fitch Co. (NYSE:ANF) is slated to release third-quarter fiscal 2016 results on Nov 18. The average analyst expectation is that ANF will post earnings per share (EPS) of 22 cents in the third quarter, compared to 48 cents in the same quarter a year ago. Full-year EPS is slated at a paltry 47 cents, compared to $1.12 last year.

This specialty retailer of premium, high-quality casual apparel for men, women, and kids, delivered negative surprises of 8.7% and 18% in the second and first quarters of fiscal 2016, respectively.

Analysts at FBR & Co lowered their Q3 2017 earnings estimates for Abercrombie & Fitch Co. in a report released on Tuesday. FBR & Co analyst S. Anderson now expects that the brokerage will earn $0.20 per share for the quarter, down from their prior forecast of $0.21. FBR & Co currently has a “Underperform” rating and a $14.00 target price on the stock. FBR & Co also issued estimates for Abercrombie & Fitch Co.’s Q4 2017 earnings at $0.99 EPS, FY2017 earnings at $0.36 EPS, FY2018 earnings at $0.66 EPS and FY2019 earnings at $0.87 EPS.

Abercrombie has been posting dismal results for a while now, as the company has been facing soft traffic trends in its U.S. flagship and tourist stores. Also, the company remains prone to adverse currency movements, as over a quarter of its total revenue comes from overseas operations.

Management had warned of challenging comparable-store sales performance in the second half of fiscal 2016, anticipating the aforementioned hurdles to linger. Moreover, the Zacks Consensus Estimate for fiscal 2016 and fiscal 2017 has been witnessing a slight downtrend in the past seven days.

Abercrombie & Fitch Co. has a 52-week low of $14.00 and a 52-week high of $32.83. The company has a market cap of $1.10 billion, a price-to-earnings ratio of 23.993 and a beta of 1.31. The stock’s 50 day moving average price is $15.54 and its 200 day moving average price is $19.34.

Why ANF?

Abercrombie & Fitch's stock performance this year has been dismal, amid a retailing resurgence and an overall bullish market. ANF's shares have plunged about 40% year to date, compared to a YTD gain of 5.2% for the SPDR S&P Retail ETF and a gain of more than 6% for the S&P 500.

Fickle young fashionistas, once enamored of Abercrombie's preppy clothing style, are abandoning the company's premium-priced offerings for "grungier," hipper and cheaper fare at up-and-coming stores such as Forever 21, Zara and H&M.

Not helping matters is fierce discount competition from Wal-Mart and e-commerce giant Amazon, where youngsters saddled with crippling student debt can find discount clothing, without the expensive Ivy League pretensions that once served Abercrombie so well.

Based in New Albany, Ohio, Abercrombie & Fitch operates 754 stores in the U.S. and 178 stores in Canada, Europe, Asia and the Middle East. As sales plummeted in recent years, the company jettisoned the eponymous logo that once made its clothing a coveted brand.

At the same time, the company sharply cut prices, but its clothes still cost more than those of popular discount operators such as Ross Stores. Ross has thrived and stolen ANF customers by forging an efficient supply chain that produces fashionable clothes at deeply discounted prices.

Analysts Opinions

 Abercrombie & Fitch Co. was downgraded by research analysts at Wolfe Research from an “outperform” rating to a “market perform” rating in a report released on Monday. Also,

  • Vetr downgraded shares of Abercrombie & Fitch Co. from a “hold” rating to a “sell” rating and set a $20.70 target price for the company. in a research report on Friday, August 12th.
  • Deutsche Bank AG reaffirmed a “hold” rating and issued a $20.00 price objective (down from $23.00) on shares of Abercrombie & Fitch Co. in a report on Monday, August 15th.
  • Standpoint Research raised shares of Abercrombie & Fitch Co. from a “hold” rating to a “buy” rating in a report on Tuesday, August 30th.
  • Jefferies Group reaffirmed a “buy” rating on shares of Abercrombie & Fitch Co. in a report on Sunday, September 4th.
  • Finally, Telsey Advisory Group cut their price objective on shares of Abercrombie & Fitch Co. from $24.00 to $21.00 and set a “market perform” rating for the company in a report on Wednesday, August 31st.

Seven analysts have rated the stock with a sell rating, seventeen have issued a hold rating and four have issued a buy rating to the company’s stock. The company currently has a consensus rating of “Hold” and a consensus price target of $21.85.

Harvey’s Options Volatility Indicator

Conclusion

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the ANF JAN 20 2017 17.000 put at approximately $2.00. Place a pre-determined sell at $4.00.

Note: No protective stop losses added -- but if you wish to do so make it $0.80.

 

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!

Options traders are not successful because they win.

Options traders win because they are successful.

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