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

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

Analyst Ratings

This is a summary of recent ratings and price targets for Stage Stores and Abercrombie & Fitch, as provided by MarketBeat.

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

Stage Stores currently has a consensus price target of $1.00, indicating a potential downside of 45.05%. Abercrombie & Fitch has a consensus price target of $12.94, indicating a potential downside of 28.84%. Given Abercrombie & Fitch’s stronger consensus rating and higher probable upside, analysts plainly believe Abercrombie & Fitch is more favorable than Stage Stores.

Profitability

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

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

Dividends

Stage Stores pays an annual dividend of $0.20 per share and has a dividend yield of 11.0%. Abercrombie & Fitch pays an annual dividend of $0.80 per share and has a dividend yield of 4.4%. Stage Stores pays out -11.0% of its earnings in the form of a dividend. Abercrombie & Fitch pays out -285.7% 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.

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Stage Stores $1.44 billion 0.03 -$37.89 million ($1.82) -1.00
Abercrombie & Fitch $3.33 billion 0.37 $3.95 million ($0.28) -64.96

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.

Insider and Institutional Ownership

52.9% of Stage Stores shares are owned by institutional investors. Comparatively, 99.3% of Abercrombie & Fitch shares are owned by institutional investors. 7.4% of Stage Stores shares are owned by insiders. Comparatively, 0.6% of Abercrombie & Fitch shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Volatility and Risk

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

Summary

Abercrombie & Fitch beats Stage Stores on 12 of the 17 factors compared between the two stocks.

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.

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.

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