Yahoo Finance Here's Why Abercrombie (ANF) Is a Promising Investment Bet Now
Abercrombie & Fitch Co. ANF is well-poised to tap the positive trends in the fashion arena, thanks to its digital endeavors and other robust strategies. The company has been gaining from brand strength and solid demand for its products that resonate well with customers. Undoubtedly, management is focused on creating a trend-right merchandise assortment, deepening relations with customers via marketing, enhancing the digital commerce agenda and efficiently controlling expenses.
Buoyed by such strengths, shares of this apparel and accessories dealer have jumped 41.8% compared with the industry’s 5.5% growth in the past three months. A VGM Score of A adds strength to this Zacks Rank #1 (Strong Buy) company.
Let’s Delve Deeper
We note that Abercrombie has been witnessing favorable margin trends, mainly driven by lower freight costs and improved average unit retail. The gross margin expanded 540 basis points to 66.4% in the fiscal first quarter. Further, the company reported an operating income of $130 million compared with a reported operating income of $34 million and an adjusted operating income of $38 million in the year-ago period. It reported an operating margin of 12.7%, which was up significantly from 4.1% in the year-ago quarter.
The company has been experiencing strong sales growth for each of its brands and most of the regions. In the fiscal first quarter , net sales improved 12% year over year at Hollister and advanced 31% at Abercrombie. The Abercrombie brand contributed 56% to the total company sales while Hollister represented 44% of sales. Comparable sales grew 29% for Abercrombie and 13% for Hollister in the quarter.
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Sales in the Americas were up 23% year over year. Additionally, sales grew 19% in the EMEA and rose 10% in the APAC. Comparable sales grew 21%, 23% and 22%, respectively, in the Americas, EMEA and APAC regions.
As part of its store optimization plans, Abercrombie plans to reposition larger format flagship locations to smaller omnichannel enabled stores. During the fiscal first quarter, it introduced a store, remodeled 13 stores and closed 13 stores. The company ended the fiscal first quarter with 753 stores. For the fiscal year, management has raised the store investment plan and aims to deliver nearly 60 new stores, 65 remodels and right-sizes, and 40 closures.
Abercrombie notes that it is on track to achieve its 2024 target of demonstrating sustainable, profitable growth. The company expects to continue benefiting from strength in its brands, driven by its focus on delivering high-quality, on-trend assortments for new and existing customers across regions and brands. It has also been focused on making strategic investments across stores, digital and technology, which are slated to strengthen the company in the long term.
Backed by the strong first-quarter fiscal 2024 results, Abercrombie has raised its sales and operating margin view for fiscal 2024. It anticipates net sales to increase 10% year over year from $4.3 billion. It earlier anticipated net sales growth in the band of 4-5%. The company expects the Abercrombie brand to outperform the Hollister brand, with the Americas region continuing to lead the regional performance. It expects an operating margin of 14% compared with the 12% mentioned earlier.
Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for fiscal 2024 sales and earnings per share (EPS) is currently pegged at $4.73 billion and $9.25, respectively. These estimates indicate corresponding growth of 10.4% and 47.3% year over year.
Given all the positives, Abercrombie stock seems to deserve a place in your investment portfolio.
Other Key Picks
We have highlighted three other top-ranked stocks, namely Gap GPS, DICK'S Sporting DKS and Tractor Supply TSCO.
Gap, a fashion retailer of apparel and accessories, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 202.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s current financial-year EPS implies growth of 21.7% from the year-ago reported figure.
DICK'S Sporting, a sporting goods retailer, presently carries a Zacks Rank #2 (Buy). DKS delivered an average earnings surprise of 4.7% in the trailing four quarters.
The consensus estimate for DICK'S Sporting’s current financial-year sales indicates growth of 1.8% from the year-ago reported figure.
Tractor Supply, the largest retail farm and ranch store chain in the United States, currently carries a Zacks Rank of 2. TSCO delivered an average earnings surprise of 2.7% in the trailing four quarters.
The Zacks Consensus Estimate for Tractor Supply’s current financial-year sales indicates growth of 3% from the year-ago reported figure.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
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DICK'S Sporting Goods, Inc. (DKS) : Free Stock Analysis Report