Brian Sozzi Breaks Down Abercrombie's Breakdown

Brian Sozzi of Wall Street Strategies is out a research note on Abercrombie & Fitch ANF after the company's CFO made some startling comments this morning, saying Q2 was likely to be worse than the first quarter. In the note, Sozzi says, "Abercrombie & Fitch (ANF) management played the role of grim reaper at today's Piper Jaffray conference, sounding a tad more cautious on 2Q financial prospects. Considering Abercrombie's shares have outperformed on a relative basis since retail stocks began to nosedive on May 12, and over a year of solid financials in the books, any inkling of a deceleration from the fruitful times was to be met with selling pressure." Sozzi goes on to say that he thinks the move is overdone, and that gross margins may actually be helped by lighter than expected inventory levels. Sozzi notes, "...gross margin comments mirrored those made throughout 1Q and while lighter than planned inventory in 2Q may constrain comparable store sales upside, it should aid gross margin which is important as inflation is now front and center (note that product scarcity has a been a theme during my Abercrombie store walks). Sozzi says that a spot to look to enter into a position in Abercrombie would be where the stock gapped up in April on the bullish analyst day. At last check, shares of Abercrombie were being hit hard today, down more than 5% to $66.25, a loss of 3.65%.