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Why Is Abercrombie (ANF) Up 30.3% Since Last Earnings Report?
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It has been about a month since the last earnings report for Abercrombie & Fitch (ANF - Free Report) . Shares have added about 30.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Abercrombie due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Abercrombie posted impressive first-quarter fiscal 2023 results, wherein the bottom and top lines surpassed the Zacks Consensus Estimate and improved year over year.
Despite significant inflation and global macroeconomic disruption, results have gained from the continued momentum in the Abercrombie brand and sequential improvement in the Hollister brand. The apparel retailer undertook efforts to improve its inventory across all labels, thereby attracting customers to shop for a diverse range of products like dresses and cargo.
Also, strategic investments across stores, digital and technology via its Always Forward Plan bodes well. Consequently, management has raised its fiscal 2023 view.
Sales & Earnings Picture
Abercrombie has reported adjusted earnings of 39 cents per share in the first quarter, whereas the Zacks Consensus Estimate was pegged at a loss of 2 cents. First-quarter earnings reflected a significant increase of 44.4% from the year-ago period’s 27 cents.
Net sales of $836 million rose 3% year over year and surpassed the Zacks Consensus Estimate of $812 million. Net sales grew 4% on a constant-currency basis.
Sales by Region and Brands
Sales were strong in the United States, up 9% year over year to $636.1 million. International sales declined 12% year over year to $199.9 million. Sales in the EMEA fell 15% to $139.3 million. In APAC, sales grew 11% to $33.3 million. Other sales plunged 19% to $27.3 million.
Brand-wise, net sales at Hollister declined 7% year over year to $400 million, while at Abercrombie, sales advanced 14% to $436 million. Our estimates for Hollister and Abercrombie sales were $406 million and $407.4 million, respectively.
Margins
The gross margin expanded 570 bps to 61%. This can be attributed to 760 basis points from lower freight costs and 230 basis points from AUR growth, partly offset by 320 basis points from higher cotton and raw material costs, and 100 basis points from the adverse currency.
Operating expenses, excluding other operating income, were up 3% year over year. Higher technology expenses and incentive-based compensation more than offset lower digital marketing and fulfillment expenses. As a percentage of sales, operating expenses of 57.3% expanded 30 bps from 57% in the prior-year quarter.
The adjusted operating income was $38.4 million against a loss of $6 million in the year-ago period.
Other Financials
Abercrombie ended the reported quarter with cash and cash equivalents of $447 million, long-term net borrowings of $297.2 million, and stockholders’ equity of $702 million, excluding non-controlling interests. The company had a liquidity of $758 million at the end of the fiscal first quarter, which included cash and equivalents, and borrowing available under the ABL Facility. Net cash used for operating activities was $1 million as of Apr 29, 2023.
Store Update
In the fiscal first quarter, the company opened six stores, including three Hollister and Abercrombie stores each. It closed seven Hollister and three Abercrombie stores. As of Apr 29, 2023, its total store base was 758, including 556 stores in the United States and 202 stores internationally.
Outlook
For fiscal 2023, management envisions net sales to grow 2-4% year over year, up from the prior guidance of 1 to 3% growth. It expects the Abercrombie brand to outperform Hollister. Region-wise, the United States is likely to outperform International. Also, fiscal 2023 includes a 53rd week, which is estimated to benefit sales by $45 million. Store expansion is also a growth driver. Abercrombie expects an operating margin of 5-6%, up from the earlier stated 4-5%. This includes gains of 250 bps from reduced freight and raw material costs, somewhat offset by inflation and increased operating expense investment for the 2025 Always Forward Plan initiatives. The company expects a capital expenditure of $160 million and a tax rate in the high-30s range, down from the previously mentioned mid-40s range.
For second-quarter fiscal 2023, the company expects sales growth of 4-6%. The operating margin is envisioned to be 2-3% compared to breakeven in the prior-year quarter. This is likely due to lower freight and raw material costs, partly offset by a marginal decline in the operating margin from inflation and increased operating expense investment for the 2025 Always Forward Plan initiatives. The effective tax rate is anticipated to be 50%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 427.27% due to these changes.
VGM Scores
At this time, Abercrombie has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Abercrombie has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Abercrombie is part of the Zacks Retail - Apparel and Shoes industry. Over the past month, Citi Trends (CTRN - Free Report) , a stock from the same industry, has gained 16.7%. The company reported its results for the quarter ended April 2023 more than a month ago.
Citi Trends reported revenues of $179.69 million in the last reported quarter, representing a year-over-year change of -13.7%. EPS of -$0.66 for the same period compares with $0.42 a year ago.
Citi Trends is expected to post a loss of $0.83 per share for the current quarter, representing a year-over-year change of -167.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -124.3%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Citi Trends. Also, the stock has a VGM Score of D.
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Why Is Abercrombie (ANF) Up 30.3% Since Last Earnings Report?
It has been about a month since the last earnings report for Abercrombie & Fitch (ANF - Free Report) . Shares have added about 30.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Abercrombie due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Abercrombie Tops Q1 Earnings & Sales Estimates, Ups View
Abercrombie posted impressive first-quarter fiscal 2023 results, wherein the bottom and top lines surpassed the Zacks Consensus Estimate and improved year over year.
Despite significant inflation and global macroeconomic disruption, results have gained from the continued momentum in the Abercrombie brand and sequential improvement in the Hollister brand. The apparel retailer undertook efforts to improve its inventory across all labels, thereby attracting customers to shop for a diverse range of products like dresses and cargo.
Also, strategic investments across stores, digital and technology via its Always Forward Plan bodes well. Consequently, management has raised its fiscal 2023 view.
Sales & Earnings Picture
Abercrombie has reported adjusted earnings of 39 cents per share in the first quarter, whereas the Zacks Consensus Estimate was pegged at a loss of 2 cents. First-quarter earnings reflected a significant increase of 44.4% from the year-ago period’s 27 cents.
Net sales of $836 million rose 3% year over year and surpassed the Zacks Consensus Estimate of $812 million. Net sales grew 4% on a constant-currency basis.
Sales by Region and Brands
Sales were strong in the United States, up 9% year over year to $636.1 million. International sales declined 12% year over year to $199.9 million. Sales in the EMEA fell 15% to $139.3 million. In APAC, sales grew 11% to $33.3 million. Other sales plunged 19% to $27.3 million.
Brand-wise, net sales at Hollister declined 7% year over year to $400 million, while at Abercrombie, sales advanced 14% to $436 million. Our estimates for Hollister and Abercrombie sales were $406 million and $407.4 million, respectively.
Margins
The gross margin expanded 570 bps to 61%. This can be attributed to 760 basis points from lower freight costs and 230 basis points from AUR growth, partly offset by 320 basis points from higher cotton and raw material costs, and 100 basis points from the adverse currency.
Operating expenses, excluding other operating income, were up 3% year over year. Higher technology expenses and incentive-based compensation more than offset lower digital marketing and fulfillment expenses. As a percentage of sales, operating expenses of 57.3% expanded 30 bps from 57% in the prior-year quarter.
The adjusted operating income was $38.4 million against a loss of $6 million in the year-ago period.
Other Financials
Abercrombie ended the reported quarter with cash and cash equivalents of $447 million, long-term net borrowings of $297.2 million, and stockholders’ equity of $702 million, excluding non-controlling interests. The company had a liquidity of $758 million at the end of the fiscal first quarter, which included cash and equivalents, and borrowing available under the ABL Facility. Net cash used for operating activities was $1 million as of Apr 29, 2023.
Store Update
In the fiscal first quarter, the company opened six stores, including three Hollister and Abercrombie stores each. It closed seven Hollister and three Abercrombie stores. As of Apr 29, 2023, its total store base was 758, including 556 stores in the United States and 202 stores internationally.
Outlook
For fiscal 2023, management envisions net sales to grow 2-4% year over year, up from the prior guidance of 1 to 3% growth. It expects the Abercrombie brand to outperform Hollister. Region-wise, the United States is likely to outperform International. Also, fiscal 2023 includes a 53rd week, which is estimated to benefit sales by $45 million. Store expansion is also a growth driver. Abercrombie expects an operating margin of 5-6%, up from the earlier stated 4-5%. This includes gains of 250 bps from reduced freight and raw material costs, somewhat offset by inflation and increased operating expense investment for the 2025 Always Forward Plan initiatives. The company expects a capital expenditure of $160 million and a tax rate in the high-30s range, down from the previously mentioned mid-40s range.
For second-quarter fiscal 2023, the company expects sales growth of 4-6%. The operating margin is envisioned to be 2-3% compared to breakeven in the prior-year quarter. This is likely due to lower freight and raw material costs, partly offset by a marginal decline in the operating margin from inflation and increased operating expense investment for the 2025 Always Forward Plan initiatives. The effective tax rate is anticipated to be 50%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 427.27% due to these changes.
VGM Scores
At this time, Abercrombie has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Abercrombie has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Abercrombie is part of the Zacks Retail - Apparel and Shoes industry. Over the past month, Citi Trends (CTRN - Free Report) , a stock from the same industry, has gained 16.7%. The company reported its results for the quarter ended April 2023 more than a month ago.
Citi Trends reported revenues of $179.69 million in the last reported quarter, representing a year-over-year change of -13.7%. EPS of -$0.66 for the same period compares with $0.42 a year ago.
Citi Trends is expected to post a loss of $0.83 per share for the current quarter, representing a year-over-year change of -167.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -124.3%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Citi Trends. Also, the stock has a VGM Score of D.