Abercrombie & Fitch Co. (ANF Quick QuoteANF - Free Report) seems well-poised for growth, thanks to its digital endeavors and other robust strategies. The company has been gaining from brand strength and solid demand for its products that resonate well with customers. Strategic investments across stores, digital and technology via its Always Forward Plan also bode well.

Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for fiscal 2024 sales and earnings per share is pegged at $4.5 billion and $7.54, respectively. The estimates suggest respective year-over-year growth of 5.9% and 20.1%. A VGM Score of A adds strength to the Zacks Rank #2 (Buy) company.

Buoyed by such strengths, shares of this apparel and accessories dealer have soared 50% compared with the industry’s 9% growth in the year-to-date period.

What’s More to Know?

Abercrombie has been working toward rationalizing its store base. As part of its store-optimization plans, Abercrombie plans to reposition larger format flagship locations to smaller omnichannel-enabled stores. The company ended the fiscal fourth quarter with 765 stores across 5 million gross square feet. It delivered 57 new store experiences, comprising 35 new stores, nine right sizes and 13 remodels, while closing 32 stores in fiscal 2023. In fiscal 2024, it expects to deliver around 75 new experiences with 45 new stores and 30 right sizes or remodels.

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We note that the company has been witnessing favorable margin trends, mainly driven by lower freight and raw material costs, and improved average unit retail (AUR). Abercrombie’s gross margin expanded 720 basis points (bps) to 62.9% in fourth-quarter fiscal 2023. The gross margin expansion included a 290 bps gain from reduced freight costs and a 430 bps benefit from AUR growth. For the first quarter of fiscal 2024, the operating margin is expected in the band of 8-10%, higher than the adjusted operating margin of 4.6% delivered in first-quarter fiscal 2023. This will be backed by a higher gross margin.

The company has been experiencing strong sales for each of its brands for a while. In fourth-quarter fiscal 2023, brand-wise, net sales improved 9% year over year at Hollister and advanced 35% at Abercrombie. The Abercrombie brand contributed 52% to the total company sales while Hollister represented 48% of sales. Comparable sales grew 6% and 28%, respectively.

Abercrombie is on track with its 2025 Always Forward plan, which focuses on brand growth, leveraging its omnichannel capabilities, and expanding digital penetration and financial discipline. As part of this plan, the company had earlier provided a financial outlook for fiscal 2025 and a long-term view. For the long term, management expects annual revenues to be $5 billion and an annual operating margin rate of 10% or more.

Given all the positives, Abercrombie stock seems to deserve a place in your investment portfolio.

Other Key Picks

We have highlighted three other top-ranked stocks, namely Gap , American Eagle (AEO Quick QuoteAEO - Free Report) and Deckers (DECK Quick QuoteDECK - Free Report) .

Gap, a leading apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). GPS delivered an earnings surprise of 180.9% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Gap’s financial-year sales suggests growth of 1.7% from the year-ago reported figure.

American Eagle, a leading casual apparel retailer, presently carries a Zacks Rank of 2. AEO delivered an earnings surprise of 22% in the last reported quarter.

The consensus estimate for American Eagle’s current financial-year sales suggests growth of 3.4% from the year-ago reported figure.

Deckers, a footwear and accessories dealer, currently has a Zacks Rank of 2. DECK delivered an earnings surprise of 32.1% in the trailing four quarters.

The Zacks Consensus Estimate for Deckers’ current financial-year sales suggests growth of 15.8% from the year-ago reported figure.