During the past two decades, management teams at virtually every major U.S. company have identified plans to move into foreign markets. Whereas in terms of population and purchasing power, the European market offers the same opportunity as the U.S. market, emerging markets such as Brazil, China, Russia, and Indonesia are becoming the third major economic block in the world.
Indeed, international sales growth has been the biggest top-line driver for hundreds -- if not thousands -- of U.S. companies in recent years. Yet it cuts both ways. The companies with considerable foreign exposure are smarting right now. Ford Motor (NYSE: F) and GM (NYSE: NYSE: GM), for example, are making huge profits domestically but losing money elsewhere.
Perhaps no single company has been punished for its foreign expansion as much as teen retailer Abercrombie & Fitch (NYSE: ANF). Investors grew excited in recent years by the fact that the company's 100 international stores, which represented just 10% of the total store base, had come to represent about 20% of sales and 30% of operating income in fiscal (January) 2012. These stores were explosively popular among teenagers -- especially in Europe. But right now, these teens aren't spending a dime.
The effect on ANF's share price has been stunning.
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for July 24th, 2014 | John Ransom
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