Critical Review: Abercrombie & Fitch (ANF) and Stage Stores (SSI)

Abercrombie & Fitch (NYSE: ANF) and Stage Stores (NYSE:SSI) are both small-cap retail/wholesale companies, but which is the better business? We will compare the two businesses based on the strength of their risk, earnings, profitability, dividends, valuation, analyst recommendations and institutional ownership.

Profitability

This table compares Abercrombie & Fitch and Stage Stores’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Abercrombie & Fitch -0.55% 0.80% 0.43%
Stage Stores -3.33% -8.67% -3.56%

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Abercrombie & Fitch and Stage Stores, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Abercrombie & Fitch 6 13 3 0 1.86
Stage Stores 1 2 0 0 1.67

Abercrombie & Fitch presently has a consensus target price of $12.78, indicating a potential downside of 24.70%. Stage Stores has a consensus target price of $1.00, indicating a potential downside of 44.75%. Given Abercrombie & Fitch’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Abercrombie & Fitch is more favorable than Stage Stores.

Valuation and Earnings

This table compares Abercrombie & Fitch and Stage Stores’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Abercrombie & Fitch $3.33 billion 0.35 $3.95 million ($0.28) -60.60
Stage Stores $1.44 billion 0.03 -$37.89 million ($1.82) -0.99

Abercrombie & Fitch has higher revenue and earnings than Stage Stores. Abercrombie & Fitch is trading at a lower price-to-earnings ratio than Stage Stores, indicating that it is currently the more affordable of the two stocks.

Dividends

Abercrombie & Fitch pays an annual dividend of $0.80 per share and has a dividend yield of 4.7%. Stage Stores pays an annual dividend of $0.20 per share and has a dividend yield of 11.0%. Abercrombie & Fitch pays out -285.7% of its earnings in the form of a dividend. Stage Stores pays out -11.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Stage Stores has increased its dividend for 7 consecutive years. Stage Stores is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

99.4% of Abercrombie & Fitch shares are held by institutional investors. Comparatively, 53.4% of Stage Stores shares are held by institutional investors. 0.6% of Abercrombie & Fitch shares are held by insiders. Comparatively, 7.4% of Stage Stores shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

Abercrombie & Fitch has a beta of 0.96, meaning that its share price is 4% less volatile than the S&P 500. Comparatively, Stage Stores has a beta of 1.29, meaning that its share price is 29% more volatile than the S&P 500.

Summary

Abercrombie & Fitch beats Stage Stores on 12 of the 16 factors compared between the two stocks.

Abercrombie & Fitch Company Profile

Abercrombie & Fitch Co. is a specialty retailer who primarily sells its products through store and direct-to-consumer operations, as well as through various wholesale, franchise and licensing arrangements. The Company operates through two segments: Abercrombie, which includes the Company’s Abercrombie & Fitch and abercrombie kids brands, and Hollister, which includes the Company’s Hollister and Gilly Hicks brands. The Company offers an array of apparel products, including knit tops, woven shirts, graphic t-shirts, fleece, sweaters, jeans, woven pants, shorts, outerwear, dresses, intimates and swimwear, and personal care products and accessories for men, women and kids under the Abercrombie & Fitch, abercrombie kids, Hollister and Gilly Hicks brands. The Company has operations in North America, Europe, Asia and the Middle East. As of January 28, 2017, the Company operated 709 stores in the United States and 189 stores outside of the United States.

Stage Stores Company Profile

Stage Stores, Inc. operates specialty department stores mainly in small and mid-sized towns and communities. The Company’s department stores offer a range of brand name and private label apparel, accessories, cosmetics, footwear and home goods. The Company operates approximately 830 specialty department stores in over 40 states under the BEALLS, GOODY’S, PALAIS ROYAL, PEEBLES and STAGE nameplates and a direct-to-consumer business. The Company’s direct-to-consumer business consists of its e-commerce Website and Send program. The Company’s e-commerce Website includes a range of merchandise categories found in its stores, as well as other product offerings. The Company’s in-store Send program allows customers to have merchandise shipped directly to their homes if the preferred size or color is not available in their local store. The Company’s private label portfolio brands are developed and sourced through agreements with third-party vendors.

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