Instead of listening to all the analyst jargon, sometimes it's best to ask the most simple question about a stock: Does the company have something people want to buy?
In the case of Abercrombie & Fitch (ANF) and Aéropostale, the answer is a resounding "no." The stores are distinctly out of fashion in the fashion world, and it will take something of a Millennial miracle to turn things around.
Abercrombie's second-straight earnings miss and persistent same-store sales declines, driven in large part by weak traffic overseas, sent the stock plunging about 20% Tuesday. Unfortunately for investors who bought into the company's turnaround story last year, management does not see the situation improving for the second half of the year.
"We've seen very persistent traffic headwinds and we expect that to continue in the back half ... we don't see a catalyst for that to change in the near term," said CFO Joanne Crevoiserat during a conference call with analysts on Tuesday.
"They just can't get it together," said TheStreet's Jim Cramer on Tuesday. "These guys don't have the right fashion," Cramer added.
Abercrombie warned that it's still seeing tepid interest for men's and women's tops. Strength in new flex denim isn't going to be enough to make the back-to-school quarter, obviously.
The retailer's chart does not look promising either. Real Money's technical analyst Bruce Kamich said that the share price of ANF has had a hard go of it lately, "but the worst price performance of the year may lie ahead."
In the daily chart, going back 12 months, Kamich points out that prices have been marked down about 50% since the zenith in March. Along the way down, there were a number of negative technical signals, including a "bearish 'death cross' of the 50-day and 200-day moving averages" in June, Kamich noted.
Furthermore, the intensity of selling, seen in the surges in volume in late May and late August, suggests that traders and investors want out. And the trend-following Moving Average Convergence Divergence oscillator just generated a new sell signal.
