Anticipation Mounts As ANF Finally Names New Top Exec


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After years marked by declining sales and a lack of permanent leadership, teen retailer Abercrombie & Fitch (ANF) finally named a new CEO earlier this month.  The company has also unveiled a new store design, part of a long-range plan to reinvigorate sales in a tough retail market.

Coming as shares of ANF hover above multi-year lows, the appointment of the new chief executive has raised anticipation in the options market.  Implied Volatility has increased to a multi-month high, even with the company's earnings report a few weeks away.

On February 1, Abercrombie & Fitch named a new CEO after more than two years of searching.  The company promoted Fran Horowitz, its merchandising chief, to the top executive position.  The firm's last full-time CEO was Michael Jeffries, who stepped down in December of 2014. 

Jeffries had built the company in the late 1990s and into the 2000s, but by 2014 had come under pressure after years of declining comparable-store sales.  After Jeffries' departure, A&F was run by Executive Chairman Arthur Martinez.

During the later part of Jeffries tenure and into the lengthy interregnum, ANF shares have suffered a long slide.  After reaching a level above $70 in mid-2011, the stock began a significant retreat.  It was below $30 by the time Jeffries stepped down and continued to fall from there.  It closed Monday's trading at $11.29, within striking distance of its lowest mark since 2000.

With the appointment of Horowitz, Abercrombie is poised for a new chapter.  This has raised expectations for the medium-term future, though the company still faces a crowded teen space and a cloudy retail future. 

The new CEO comes with lengthy and impressive retail resume. She joined Abercrombie in 2014 as Brand President for its Hollister line of stores.  She became president and Chief Marketing Officer in late 2015.  Before coming over to A&F, Horowitz served in key positions at Ann Taylor Loft and at Express.

The option market has responded to the new CEO by bidding up Implied Volatility for ANF.  IV has been drifting higher since mid-January, eventually reaching 57.9 on February 7.  This was its highest level since November, when the company reported its last earnings statement.  IV ran up ahead of that report, climbing to a high 78.6 on November 11

That earnings report, released on November 18, sparked a nearly 14% drop in the company's stock.  This came after the company's profit plunged from the previous year and came in below expectations.  Sales fell 6% to just below $822 million.  This included a 13% drop in sales at its flagship brand.

This was part of a string of weak quarterly reports.  According to an in-depth report by Reuters, sales at A&F have dropped for 15 consecutive quarters.

The company's next earnings report is likely to be released on March 1.  Analysts are expecting another sharp drop in quarterly earnings.  Abercrombie is expected to earn $0.76 per share, compared to a mark of $1.08 per share in the same period last year.  Revenue is expected to fall nearly 6% to $1.05 billion.

The ATM Straddle premium for the February 10 expiration is $0.40, or 3.6%.  For the March 3 expiration, which will likely include the company's next earnings report, there is an ATM Straddle premium of $1.68, or 14.9%.  Looking further out, the January 2018 expiration has a premium of $4.76, or 42.1%, while the January 2019 expiration has a premium of $6.50, or 57.5%.