Clothing retailer Abercrombie & Fitch saw its stock price drop nearly 10 percent Wednesday after it asked Michael "The Situation" Sorrentino of MTV's "Jersey Shore" not to wear its clothes. This was the first trading session after the company offered Sorrentimo and his co-stars "substantial payment" to stop wearing Abercrombie & Fitch clothes.
It is unlikely that the move was wholly responsible for the drop. The company recently reported earnings that beat expectations and gave lukewarm comments on its outlook.
Abercrombie & Fitch's sales increased 23 percent in the quarter ended July 30 to $917 million. The company reported a 64 percent increase in net profit, reaching $32 million, or 35 cents earnings per share.
That's significantly more than the 27 cents forecast by John D. Morris, the senior retail analyst for BMO Capital Markets.
Morris said that Wednesday's sell-off was largely due to management's guarded comments with analysts, especially after recent gains.
According to CNN, Morris said that "Management's tone was cautious, and that creates an air of uncertainty." He added that "In this fearful macro backdrop, investors don't like that."
Morris also said that Abercrombie & Fitch was admirable for associating itself with a celebrity and capitalizing on "the situation."
"With respect to The Situation, Abercrombie & Fitch saw an opportunity to get some advantageous publicity during the all-important back-to-school season," Morris said. "It's definitely a good water-cooler conversation."
On Tuesday, Abercrombie & Fitch released the following statement: We are deeply concerned that Mr. Sorrentino's association with our brand could cause significant damage to our image. We understand that the show is for entertainment purposes, but believe this association is contrary to the aspirational nature of our brand, and may be distressing to many of our fans."