Earnings Preview: Abercrombie & Fitch to post 3Q

OVERVIEW: Although teen retailers have been somewhat buffered from the economic downturn--because parents tend to cut back spending on themselves before their kids--teen apparel retailers are increasingly reporting slowing sales.

Abercrombie & Fitch has been harder hit than others because it continued to invest internationally and kept price points steady, while other teen retailers such as Aeropostale Inc. and American Eagle Outfitters Inc. have used promotions more aggressively.

While some analysts say Abercrombie's strategy will position the retailer well when the economy eventually recovers, sales dramatically decelerated during the quarter.

Sales in stores open at least one year, a key retail metric known as same-store sales, fell 11 percent in August, 14 percent in September and 20 percent in October.

BY THE NUMBERS: In October, the retailer predicted third-quarter earnings between 74 cents and 76 cents per share. Analysts polled by Thomson Financial predict a profit of 71 cents per share on revenue of $910.5 million.

ANALYST TAKE: Friedman, Billings, Ramsey analyst Adrienne Tennant said Abercrombie is "very much at risk" for missing third-quarter expectations, due to the weakening environment.

"Abercrombie (same-store sales) are decelerating at an alarming rate and, without promotions, we fear November will be even worse," wrote Tennant, who rates the company "Outperform."

Jefferies & Co. analyst Randal Konik, who rates the company "Hold," said in a note to investors the "high relative pricing, limited promotions, and aggressive sales by teen competitors is placing pressure on Abercrombie sales trends."

He said third-quarter results are likely to meet expectations but there is some risk of a miss.