AEO’s Confession Dragging Down This Overpriced Retailer

Abercrombie & Fitch (ANF – NYSE)

Tuesday, August 06, 2013

It has been hellaciously difficult getting a bead on retail lately. One poll puts consumer confidence at a six-year high, while another concedes that that self-reported spending has actually been flat for months now.

Today, an actual retailer — American Eagle Outfitters (AEO – NYSE) – warned us that expectations are way too high, and that its quarterly profit will probably be less than half of analysts’ forecasts. AEO is blaming the trouble on “a weak labor market that has left many teens jobless, and without money to spend, and “an environment of deep discounts.”

But this alert is not about AEO, which has already lost some 17% on this news. Rather, it’s about AEO’s rival in the overpriced T-shirt and Jeans niche, Abercrombie & Fitch (ANF – NYSE).

Long-time readers know that I despise ANF’s blow-hard CEO and his absurd marketing, hiring and shelving practices, both as an analyst and a father of daughters, and heartily recommend shorting the company on most any rise.

ANF 080613

Bottarelli Research Tip: ANF was riding high on those early consumer confidence reports. But now, it’s finally tumbling on AEO’s confession. The current technicals indicate a drop to at least $44.68, with a strong probability of a follow-on move to $38.33. What’s more, that move would complete a Head & Shoulders Sell Signal that would sentence ANF to a plunge to $33.17. And, I can’t think of a company that deserves it more.

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