Abercrombie & Fitch Co. (ANF) or Abercrombie & Ditch?

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Abercrombie & Fitch Co. (NYSE:ANF) has been on and off the rocks for the past couple of years. The company has been grilled in a recent wave of negative publicity. In addition, the company delivered fiscal first quarter results at near-disastrous levels, leading to a sharp decline in stock price that gave up most of 2013's gains.

The entire retail industry has delivered weak results and most competitors are still struggling due to weak traffic at the malls. Let's examine how badly Abercrombie & Fitch Co. (NYSE:ANF) has been hit and what competitors are doing.

Abercrombie & Fitch Co. (NYSE:ANF)

Weak fundamentals

Abercrombie & Fitch Co. (NYSE:ANF) revised its fiscal 2013 guidance to $3.15-$3.25 per share, below earlier analyst estimates of $3.49 per share. According to the company's latest guidance, the drop is expected to continue at a higher rate this year.

American Eagle Outfitters (NYSE:AEO), Abercrombie & Fitch Co. (NYSE:ANF)'s most significant competitor, saw comparable store sales fall year-over-year at a modest rate of about 5%. Despite the challenging macroeconomic environment, American Eagle Outfitters (NYSE:AEO) is expecting to open more stores while closing stores at a lower rate.

Aeropostale, Inc. (NYSE:ARO), the specialty retailer of casual apparel and accessories, is considered Abercrombie & Fitch Co. (NYSE:ANF)'s second most important competitor. Aeropostale, Inc. (NYSE:ARO) comparable sales slid at a stronger rate of 15% over the quarter. The company's guidance for full-year earnings of $1.42-$1.45 represents modest growth over 2012's $1.39 per share.

Despite challenging years for retailers, American Eagle delivered a single digit growth rate while Abercrombie & Fitch Co. (NYSE:ANF) has shown more growth. On the other hand, Abercrombie saw a larger earnings fall during recession years. Meanwhile, Aeropostale's earnings profile has simply collapsed, and I believe that in its current state it does not represent a threat to Abercrombie or American Eagle.

Abercrombie has experienced some serious inventory issues, not to mention last year's embarrassing inventory mistake, which appear to have cost about $80 million in sales. Moreover, the company estimated that 10 of 15 points of its comparable sales decline were attributable to a lack of inventory. Aeropostale reported having too much inventory on hand, which was music to consumer ears due to the aggressive promotions the company had to initiate.

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