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Here's Why Abercrombie (ANF) is Poised for Earnings Beat in Q1

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Abercrombie & Fitch Co. (ANF - Free Report) is scheduled to report first-quarter fiscal 2022 results on May 24, before the opening bell. The leading apparel retailer is expected to register top-line growth when it reports first-quarter fiscal 2022 numbers.

The Zacks Consensus Estimate for fiscal first-quarter revenues is pegged at $801.6 million, suggesting 2.6% growth from that reported in the year-ago quarter. For fiscal first-quarter earnings, the consensus mark is pegged at 7 cents per share, implying a decline of 89.6% from the year-ago quarter's reported figure. The consensus estimate has moved up by a penny in the past 30 days.

In the last reported quarter, the company reported a negative earnings surprise of 10.9%. However, ANF’s earnings surpassed the Zacks Consensus Estimate by 103.5%, on average, in the trailing four quarters.

Abercrombie & Fitch Company Price and EPS Surprise

 

Abercrombie & Fitch Company Price and EPS Surprise

Abercrombie & Fitch Company price-eps-surprise | Abercrombie & Fitch Company Quote

Factors to Note

Abercrombie has been gaining from a solid online show, lower promotions and tight expense management. Its store-optimization efforts also bode well. Regarding its cost-minimization measures, ANF’s first-quarter fiscal 2022 results are expected to reflect gains from prudent expense-management strategies. This, along with higher AUR across brands and channels, stemming from reduced promotions, markdowns and clearance activity, has been aiding margins. On its last reported quarter’s earnings call, management expected fiscal first-quarter operating margin to be above the pre-pandemic levels.

The company has been on track with investments in brand marketing, digital experience, and growing Gilly Hicks and Social Tourist brands. Also, its expanded digital and omni-channel capabilities, customer additions and robust digital-marketing efforts bode well.

ANF has been investing in bolstering omni-channel capabilities, including curbside and ship-from-store services. It has also been striving to optimize capacity at its distribution centers to meet increased digital demand.

Abercrombie has been working toward rationalizing its store base by reducing dependence on underperforming tourist-driven locations. As part of its store-optimization plans, the company has been aiming to reposition larger-format flagship locations to smaller omni-channel enabled stores. Owing to this, the fiscal first-quarter top line is expected to have benefitted from an improvement in the store performance.

However, inventory delays due to supply-chain headwinds have been affecting Hollister and Gilly Hicks. Investments in marketing, increased digital fulfillment expenses and higher incentive-based compensation remain concerning.

On its last reported quarter’s earnings call, management anticipated fiscal first-quarter operating expenses, excluding other operating income, to increase 6% year over year.

Also, higher freight expenses, stemming from supply-chain disruptions, are likely to have acted as deterrents. This, along with raw material inflation, is likely to have hurt the company’s bottom line in the quarter under review.

In its last earnings report, Abercrombie expected fiscal first-quarter gross margin to decline 400 bps year over year. The guidance considers the adverse impacts of $65 million of freight costs.

What the Zacks Model Unveils

Our proven model conclusively predicts an earnings beat for Abercrombie this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Abercrombie has a Zacks Rank #2 and an Earnings ESP of +11.63%.

Other Stocks With Favorable Combination

Here are some more companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:

Costco Wholesale Corporation (COST - Free Report) currently has an Earnings ESP of +1.90% and a Zacks Rank of 2. The Zacks Consensus Estimate for quarterly earnings moved up by 0.7% in the last 30 days to $3.04 per share, indicating a 10.6% increase from the year-ago quarter's reported number. You can see the complete list of today’s Zacks #1 Rank stocks here.

However, Costco’s top line is expected to have risen year over year. The Zacks Consensus Estimate for COST’s quarterly revenues is pegged at $51.76 billion, suggesting growth of 14.3% from the figure reported in the prior-year quarter. COST has delivered an earnings beat of 13.3%, on average, in the trailing four quarters.

Fastenal (FAST - Free Report) currently has an Earnings ESP of +2.82% and a Zacks Rank of 2. The Zacks Consensus Estimate for quarterly earnings has been unchanged at 50 cents per share in the past 30 days, implying 19.1% growth from the year-ago quarter’s reported number.

However, Fastenal’s top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $1.78 billion, which suggests a rise of 18.3% from the figure reported in the prior-year quarter. FAST has delivered an earnings beat of 5%, on average, in the trailing four quarters.

Casey’s General Stores (CASY - Free Report) currently has an Earnings ESP of +3.73% and a Zacks Rank of 3. The Zacks Consensus Estimate for quarterly earnings has moved north by 2.8% to $1.48 per share in the past 30 days, indicating a 32.1% rise from the year-ago quarter’s reported number.

Casey’s top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $3.34 billion, which suggests a rise of 40.4% from the figure reported in the prior-year quarter. CASY has delivered an earnings beat of 21.6%, on average, in the trailing four quarters.

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