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Abercrombie (ANF) Rallies on Upbeat Holiday Season, View Hike

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Abercrombie & Fitch Co. (ANF - Free Report) provided a business update yesterday, raising its outlook for the fourth quarter and fiscal 2022 on a robust holiday season performance. The company highlighted that its brands performed well during the peak holiday season, reflecting a sequential rise from the third-quarter levels. Consequently, the company raised its sales and operating margin view for the fiscal fourth quarter.

ANF noted that the momentum continued at the Abercrombie brand in the holiday fest, with the women’s business performing exceptionally well. The company expects the women’s business to deliver the highest-ever fourth-quarter sales this fiscal year. Further, the brand performance was enhanced by increased sales trends in the men's business from the fiscal third quarter.

Moreover, Abercrombie expects the Hollister brand to conclude the fiscal fourth quarter with sales lower than the 2021 levels. However, sales trends for the brand have improved considerably from the third quarter of fiscal 2022. These gains were driven by the realization of initial gains from assortment adjustments and personnel changes.

Shares of the Zacks Rank #3 (Hold) company rallied 8.7% on Jan 9, 2023, following the company’s strong holiday performance and an upbeat view. Shares of ANF have declined 21.5% in the past year compared with the industry's fall of 33.4%.


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Outlook Update

For the fourth quarter of fiscal 2022, management envisions net sales growth of 1-2% compared with the prior view of a decline of 2-4%. The company reported net sales of $1.2 billion in fourth-quarter fiscal 2021. The sales view includes a 210-bps impact of adverse currency rates compared with a 300-bps impact mentioned earlier. The company anticipates an operating margin of 6-8% compared with 5-7% mentioned earlier.

For fiscal 2022, ANF expects net sales to decline 1% from the year-ago period’s reported figure of $3.7 billion. Earlier, management predicted a net sales decline of 2-3%. The sales outlook assumes a negative impact of 200 bps of currency movements compared with the 250-bps impact mentioned before. Abercrombie & Fitch expects an operating margin of 2.5-3% compared with the prior stated 2-3%.

Management also noted that it would continue to steer through the evolving macroeconomic environment going into 2023. The company is on track with its actions to tightly manage operating expenses. ANF expects inventory levels to be consistent with 2021 by the end of 2022, placing its brands to pursue fresh purchases in the spring season.

The company continues to leverage its strong financial position to facilitate key, long-term investments in its operations, particularly in technology, stores and supply chains. Abercrombie expects these investments to position it well to attain its 2025 Always Forward Plan.

Stocks to Consider

We have highlighted three better-ranked companies in the Retail - Wholesale sector, namely Chico's FAS (CHS - Free Report) , Capri Holdings (CPRI - Free Report) and Boot Barn (BOOT - Free Report) .

Chico's, an omnichannel specialty retailer of women's private branded casual-to-dressy clothing, intimates, and complementary accessories, presently flaunts a Zacks Rank #1 (Strong Buy). CHS has a trailing four-quarter earnings surprise of 87.5%, on average. The CHS stock has declined 3.5% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Chico's sales and EPS for fiscal 2022 suggests growth of 19.6% and 127.5%, respectively, from the year-ago reported levels.

Capri Holdings, which operates membership warehouses, presently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 20.99%, on average. Shares of CPRI have risen 1.4% in the past year.

The Zacks Consensus Estimate for Capri Holdings’ sales and EPS for the current financial year suggests respective growth of 1% and 10.6% from the year-ago period’s reported figures. CPRI has an expected EPS growth rate of 11.8% for three to five years.

Boot Barn, a lifestyle retail chain, presently has a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 11.7%, on average. Shares of BOOT have declined 41.9% in the past year.

The Zacks Consensus Estimate for Boot Barn’s sales for the current financial year suggests growth of 11.9% from the year-ago period’s reported figure, while the same for EPS indicates a decline of 5.5%. BOOT has an expected EPS growth rate of 20% for three to five years.

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