Get Real, Abercrombie

 | May 25, 2013 | 12:00 PM EDT
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What was all that talk about a sequential improvement in Abercrombie & Fitch's (ANF) international business last quarter?

Turns out that must have been fleeting because Abercrombie reported first-quarter total same-store sales fell 15%. The U.S. was bad, down 14%, but international was downright ugly, falling 16%. I'm just relieved that all my talk about negative (and worsening) trends in Europe wasn't due to breathing in too much cologne at the retailer's London flagship store.

Abercrombie missed first-quarter top-line expectations by 11% and guided down to annual earnings per share of $3.15 to $3.25 from a previous guide of $3.35 to $3.45.

We have heard many excuses for sales misses this quarter (namely weather), but let's throw in a new one: product shortage. Abercrombie's assertion is that  product shortages were responsible for 10 to 15 of the negative comparison points. And part of this shortage was from late delivery of spring product.

Wait a minute -- Abercrombie also blamed the weather? Why would it need more spring product if bad weather is hurting warm-weather apparel? I'm confused. I am also confused because if you look at the average two-year inventory levels, product was actually not that light.

Abercrombie now believes its inventory issues are in the rearview mirror. But comps are still expected to be negative for the remainder of the year. Management would also like you to focus on China, where comps are up 40%.

I prefer to focus on the fact that a retailer with a -15% comp just opened at 15x forward guidance -- that is, assuming guidance is reality.

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