Abercrombie tries for $1 billion in annual online sales
A growing direct-to-consumer business is necessary for the teen-apparel retailer achieve its aggressive goal.
The teen-apparel retailer saw 41% growth in its direct-to-consumer business, which will help it achieve its ambitious goal of $1 billion in annual Internet sales. E-commerce sales have become a major focus area for teen-apparel retailers such as American Eagle Outfitters (AEO), Aeropostale (ARO) and Gap (GPS).
We currently have a price estimate of just about $64 for Abercrombie's stock, which is about 15% ahead of the market price.
Abercrombie looks set to achieve its target
In the second quarter, Abercrombie emphasized growing its direct-to-consumer business as its prime strategy in the near term. The company has reiterated its target to become a $1 billion e-commerce brand in the foreseeable future largely as a result of its global shipping initiatives.
With solid growth of 41% this quarter, Abercrombie is well positioned to achieve its target. Internet sales accounted for 12.4% of total sales this quarter, compared with 11.1% last quarter and 10.6% in the third quarter of 2010.
Additionally the increasing contribution of Internet sales will also help Abercrombie improve margins since the direct-to-consumer business model carries higher margins than the retail business.
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Bill Stiritz owns more than 5% of the company, and has experienced an estimated $145 million in paper losses on his investment.
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