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Anatomy of Success: Abercrombie & Fitch (ANF)

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The proven Zacks Rank is an exceptional stock-picking strategy for both beginning and experienced investors. The system emphasizes earnings estimates and estimate revisions, highlighting a variety of stocks that are currently displaying the right characteristics to beat the market.

When a company earns a Zacks Rank #1 (Strong Buy), it is poised to provide superior returns over the next one to three months. But achieving this top rank is no easy feat. Of the thousands of companies tracked by Zacks, roughly 5% earn this designation.

Below, you will learn a company that shows the strength of the Zacks Rank. If investors had followed our ranking system when it upgraded this specialty retailer, they would have witnessed massive profits.

Abercrombie & Fitch Co. (ANF - Free Report)

Based in New Albany, Ohio, Abercrombie is a leading global specialty retailer of apparel and accessories for men, women, and kids through three brands: Abercrombie & Fitch, abercrombie kids, and Hollister. It was originally founded back in 1892 as an outdoor specialty retailer, carrying high quality camping, fishing, and hunting gear. Today, ANF operates over 865 stores across North America, Europe, Asia, and the Middle East, as well as two e-commerce sites.

ANF was first added to the #1 (Strong Buy) list last September after it reported better-than-expected second-quarter fiscal 2017 results. Both the top and bottom line beat the Zacks Consensus Estimate, but total comparable sales were down 1%. Looking at comps by brand, Abercrombie saw a decrease of 7% in Q2, but Hollister was a bright spot, with sales growing 5%. Investors should note that even though comps across the board were an improvement over the first-quarter. Additionally, direct-to-consumer sales hit roughly 24% of total company net sales. ANF stock closed at $14.24 per share that day, and the retailer maintained its #1 run until almost the end of October.

Abercrombie became a #1 stock again after it reported impressive Q4 2017 results. Earnings of $1.38 easily beat our consensus estimate for the holiday quarter, while revenues grew 15% year-over-year. And, by brand, net sales increased 19% at Hollister and 9% at Abercrombie from the prior-year period. Total comps hit 9%, while Abercrombie saw positive comps growth for the first time that year, growing 5%; Hollister witnessed nice comps growth of 11%. Management noted that 2017 was a year of “significant progress,” and the company achieved many milestones. In addition to Abercrombie’s positive comparable sales, Hollister was able to grow to $2 billion in sales. Seven months after ANF first became a Strong Buy stock, shares rose 63.3% to $23.25.

The stock became a Zacks Rank #1 once again in mid-August in anticipation of its second quarter fiscal 2018 report; the reports Q2 results before the bell on August 30. Analysts expect Abercrombie to report a loss of five cents per share for the quarter on revenues of $847.10 million, representing year-over-year growth of 68.75% and 8.7%, respectively. 11 months after gaining the coveted Strong Buy title, shares gained 90.6% to $27.14.

ANF is now a #3 (Hold) on the Zacks Rank. The stock has been on a major run over the past year, and is up nearly 187% in that time frame.

This table shows the price performance of ANF (in red), as well as the 12-month forward looking EPS estimate (in green) from the time the stock first earned a Zacks Rank #1 (Strong Buy). During this stretch, ANF never moved lower than a Zacks Rank #3 (Hold).

By utilizing the Zacks Rank, investors are able to easily identify elite stocks that are best positioned to beat the market on a consistent basis, and how to hold those top stocks as they continue to grow.

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