CNBC’s Jim Cramer on Friday reviewed recent earnings from teen-focused apparel makers Abercrombie & Fitch and American Eagle Outfitters. While he was more optimistic about the former, he was generally cautious on the group.
“I want you to limit your downside with these teen retailers. You never know when a company like this may go from sink and swim to just plain sink, at least for the next quarter,” he said. “But to me, Abercrombie — I think that’s worth buying perhaps as soon as next week.”
According to Cramer, teenage consumers are “notoriously fickle,” a dynamic that makes it hard to bet on stocks that rely on them. Retailers and consumer-oriented companies broadly have expressed worries about the economic impact of President Donald Trump’s tariffs, as most manufacture abroad. Abercrombie & Fitch is down 47.49% year-to-date while American Eagle is down 34.25%.
He was disappointed with American Eagle’s quarter — the retailer missed on earnings, recording a $75 million write-down in spring and summer merchandise. The company also reduced its full-year guidance before the report because of macroeconomic uncertainty. Cramer said it was strange that American Eagle announced a $200 million buyback while business is weaker. Retailers need flexibility, he said, and American Eagle’s buyback will give the company less flexibility.
Abercrombie & Fitch managed to beat the estimates, but it cut guidance as it gears up to weather steep tariffs. However, Cramer expressed confidence in CEO Fran Horowitz, who has managed to overhaul the company and execute a substantial turnaround after the brand struggled for years, having previously garnered a reputation for exclusivity, toxicity and racism. He was impressed with the retailer’s efforts to diversify its supply chain. He noted that its offshoot brand, Hollister, grew same stores sales while they declined for the namesake brand, which is targeted at slightly older crowd.
If investors believe Hollister can keep up the momentum and the flagship brand can improve, Cramer said the stock could be bought. He also said a Monday JPMorgan event featuring top Abercrombie management could move the stock.
“I don’t usually recommend options here, but I can tell you that teens are so fickle that if I were to buy Abercrombie ahead of the talk at JP Morgan on Tuesday, I actually might even do it with deep in the money calls,” Cramer said.
Abercrombie & Fitch and American Eagle did not immediately respond to request for comment.
