Possibilities trade war between the United States and China, the Fed’s future course of action over monetary policies and chances of military action on Syria have kept the markets on tenterhooks. However, Abercrombie & Fitch Co.(ANF - Free Report) has braved the odds, scaling a 52-week high of $28.45 on Apr 11.
In fact, this specialty retailer has outperformed the industry in the last three months on the back of strategic capital investments, cost-saving efforts, and loyalty and marketing programs. The stock has gained 47.2%, bettering the industry’s decline of 2.1%.This Zacks Rank #3 (Hold) company has a VGM Score of A and long-term earnings growth rate of 14%, highlighting its potential.
Is the Recent Trend Sustainable?
Abercrombie & Fitch in an effort to accelerate the top line is also focusing on digital expansion to make shopping more convenient and enhance customer satisfaction. The company made significant progress in expanding digital presence with the growth of direct-to-consumer and omni-channel capabilities. The company’s investments in mobile, omni-channel and fulfillment have significantly aided the growth of the direct-to-consumer business, which resulted in double-digit improvement in the United States and international markets in fourth-quarter fiscal 2017. Notably, digital engagement with consumers has been its core strength.
The company is also closing underperforming U.S. chain stores in order to improve profitability. Store closure gives Abercrombie & Fitch more flexibility in terms of cost savings, amid a tough environment. Nonetheless, in fiscal 2018, the company plans to introduce 21 full-price stores, including 11 in the United States and 10 in international locations in the current fiscal year.
Apart from these, the company’s effort to expand Hollister stores in the new markets is boosting investors’ confidence in the stock. This is because its smaller size of operation makes it cheaper and less capital intensive. The Hollister brand reflects persistent positive momentum from previous quarters, reaching the $2 billion mark in sales in fourth-quarter fiscal 2017. Further, comparable store sales (comps) of the Hollister brand improved 11% in the fourth quarter as it continued to capitalize on momentum, delivering positive comps in both the United States and overseas.
Barring any unprecedented events, the aforementioned factors are likely to lift the stock.
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