Stock of the day 27/05/2015 – Tate & Lyle PLC/Abercrombie & Fitch Co

It’s all sugar substitutes and tasteless t-shirts on Thursday as Tate & Lyle PLC and Abercrombie & Fitch Co reveal their latest results.

Investors will be hoping for a spoonful of sugar to help the medicine go down when Tate & Lyle announces its full year 2014/15 earnings release. After impressive growth between March 2009 and mid-2013, Tate & Lyle’s fortunes have begun to change in the last couple of years. It opened 2014 at £8.35, but an abrupt fall in the middle of February saw the stock fall from £7.86 to £6.59 in the space of a day. The company had managed to claw its way back to £7.33 by September only to suffer another near 17% decline which took Tate & Lyle to £6.10.


(Source: IT-Finance.com 27/05/2015)

The company entered 2015 at this price, and managed to increase to £8.81 by the end of January. However, another 14% decline in February eventually led Tate & Lyle to a year low of £5.54. Any progress the stock had made was once again wiped out in April, and Tate & Lyle is currently trading at £6.02.

So what has been the cause of all these declines? Profit warnings, profit warnings and more profit warnings. In February, September, and February again Tate & Lyle has announced issues ominous statements about its performance, in the process sending its shares tumbling. First, February 2014 saw Tate & Lyle blame a ‘glut of sucralose’ for weakened profits after cheaper Chinese rivals caused a build-up of unsold Splenda in the country. September saw the Splenda-based suffering joined by ‘supply chain issue’ woes caused by the USA’s harsh winter, leading to yet another profit warning.

Cut to February 2015, and Tate & Lyle was the bearer of more bad news, claiming its ‘bulk ingredients’ sector, responsible for around two thirds of its sales, was seeing weak figures alongside the fact that the commodities slump was eating into its profits. The most recent damage was then done in April, as Tate & Lyle announced it was exiting its bulk ingredient operations in Europe in an attempt at restructuring.

Whilst investors will be keen to hear the progress of Dolca Prima, Tate & Lyle’s new allulose-based sweetener, which received the unappetising, yet positive, rating of ‘generally recognised as safe’ by the US FDA, the key focus will be on its figures. All of the many issues listed above are expected to cause Tate & Lyle’s full profit before tax of £206 million with earnings per share of £0.34. Analysts have given the company a consensus rating of ‘hold’ with an average target price of £6.08.

Following the earthshattering news that it is set to abandon its signature topless greeters, Abercrombie & Fitch announces its Q1 2015 earnings release. The declines that set in at the end of 2011 and firmly took hold in the middle of 2013 haven’t shown any signs of abating in 2015. Abercrombie was looking at a strong 2014; it opened the year at $32.45 and had reached a 12 month high of $45.58 at the end of August 2014. However, by the New Year the company was back trading at $28.65 and after tickling $30 at the start of January resumed its decline. A low of $19.35 at the start of March set the tone for the rest of the year, and the stock is currently trading at $20.12.


(Source: IT-Finance.com 27/05/2015)

At its best in 2011 Abercrombie was trading at $77.30 per share; the continuous crumbling of its stock price has caused some serious questions to be asked in-house, and the company is slowly trying to change its unflattering image. The controversies surrounding former CEO Mike Jefferies (still not permanently replaced since stepping down earlier in the year) ate away any good-will surrounding Abercrombie, and the company now faces the unenviable task of changing the firmly entrenched public opinion surrounding its brands.

Its full year earnings in March were somewhat of a disaster, causing a 16% fall on the markets to the aforementioned $19.34 low. It missed estimates in earnings per share, at $1.15 against $1.17 expected and $1.34 year-on-year, whilst its quarterly revenue came in at $1.12 billion versus the $1.17 billion forecast. Things aren’t looking much better this quarter, with analysts expecting Abercrombie to post its worst earnings in 5 years at earnings per share of $0.34 alongside revenue of $730.08 million. This compares to a loss per share of $0.17 in the first quarter 2014 with revenue of $822.43 million. Following this analysts have given Abercrombie & Fitch a consensus rating of ‘hold’ with an average target price of $29.42.