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Bull of the Day: Abercrombie & Fitch (ANF)

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Abercrombie & Fitch Co. (ANF - Free Report) is back in favor with consumers after posting a strong holiday quarter. This Zacks Rank #1 (Strong Buy) is expected to continue to build on recent momentum by growing earnings by the double digits in fiscal 2024.

Abercrombie & Fitch is a specialty retailer of apparel and accessories for men, women and kids. Founded in 1892, Abercrombie & Fitch consists of 5 global brands including Hollister, Gilly Hicks, Abercrombie & Fitch, abercrombie kids and Social Tourist.

It operates 760 stores across North America, Europe, Asia and the Middle East as well as e-commerce sites.

Fourth Beat in a Row in Fiscal Fourth Quarter 2023

On Mar 6, 2024, Abercrombie & Fitch reported its fiscal fourth quarter and full year fiscal 2023 results and beat on the Zacks Consensus for the fourth quarter in a row.

Earnings were $2.97 versus the Zacks Consensus of $2.81, for a beat of $0.16.

It was driven by Abercrombie brands which saw comparable sales jump 28% in the quarter with Hollister brands, which includes Gilly Hicks, up 6%. Comparables were up 16% company-wide in Q4. Comparable sales are one of the key metrics for retailers.

For the full year, comparables were up 13% company-wide with Abercrombie brands up 23% and Hollister up 4%.

For the full year, net sales were up 16% to $4.28 billion from $3.7 billion a year ago.

Also for the full year, gross profit rose 600 basis points to 62.9% driven by 340 basis points of higher average unit retail and 300 basis points from lower freight costs and higher raw materials. This was partially offset by 30 basis points from the adverse impact of exchange rates.

As of Feb 3, 2024, inventories also fell 7% to $469 million. Falling inventories is a good sign as many retailers had seen them soar 2 years ago when supply chain issues hit hard.

Cash and equivalents also rose to $901 million from $518 million a year ago.

Analysts and Abercrombie Bullish on Fiscal 2024

Abercrombie & Fitch gave a bullish outlook for fiscal 2024 as it expects momentum to continue. It expects net sales growth in the range of 4% to 6%, which includes the negative impact of about $50 million due to the extra 53rd reporting week in fiscal 2023.

It expects the Abercrombie brands to continue to outperform the Hollister brands and for the Americas to continue to lead geographic performance.

It also expects the year-over-year growth rate to be higher in the first half of the year, partially due to the calendar shifts from the 53rd week in 2023.

And the analysts are equally as bullish. 5 estimates have been revised higher for fiscal 2024 since the earnings report. That has pushed the Zacks Consensus up to $7.31 from $6.51 in the last 30 days.

That's earnings growth of 16.4% in fiscal 2024 as the company earned $6.28 in fiscal 2023.

Zacks Investment Research
Image Source: Zacks Investment Research

Shares Soar Over the Last Year

The Street has caught onto the bullish story with Abercrombie & Fitch. The shares are up 402% over the last year, easily beating the S&P 500 up 30.3% during that same time.

Zacks Investment Research
Image Source: Zacks Investment Research

Is it too hot to handle?

Abercrombie trades with a forward P/E of just 17.2, which is below the average of the S&P 500.

For investors looking for a retail stock with strong momentum and attractive valuations, Abercrombie & Fitch should be on your short list.


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