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Abercrombie's (ANF) Growth Moves Seem Prudent: Apt to Buy?
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Abercrombie & Fitch Co. (ANF - Free Report) looks well-poised to tap the positive trends in the fashion arena, 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. Buoyed by such strengths, shares of this apparel and accessories dealer surged 41.2%, impressively outperforming the industry’s 5.8% growth in the past three months.
Markedly, the company has been experiencing strong sales growth across each of its brands and most of the regions. In the first quarter of fiscal 2024, net sales improved 12% year over year at Hollister and advanced 31% at Abercrombie. The Abercrombie brand contributed 56% to the total company sales while Hollister represented 44% of sales. Comparable sales grew 29% for Abercrombie and 13% for Hollister.
Abercrombie has been witnessing favorable margin trends too, mainly driven by lower freight costs and improved average unit retail. The gross margin expanded 540 basis points to 66.4% in the fiscal first quarter. Further, the company reported an operating income of $130 million, up from an adjusted operating income of $38 million in the year-ago period. Also, the operating margin of 12.7% was up significantly from 4.1% in the year-ago quarter.
As part of its store-optimization efforts, Abercrombie plans to reposition larger format flagship locations to smaller omnichannel-enabled stores. During the fiscal first quarter, it introduced a store, remodeled 13 stores and closed 13 stores. For the current fiscal year, management has raised the store investment plan and aims to deliver nearly 60 new stores, 65 remodels and right-sizes, and 40 closures.
Abercrombie notes that it is on track to achieve its 2024 target of demonstrating sustainable, profitable growth. The company expects to continue benefiting from strength in its brands, driven by its focus on delivering high-quality, on-trend assortments for new and existing customers across regions and brands. It has also been focused on making strategic investments across stores, digital and technology, which are slated to strengthen the company in the long term.
Image Source: Zacks Investment Research
Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for fiscal 2024 sales and earnings per share is currently pegged at $4.73 billion and $9.25, respectively. These estimates indicate corresponding growth of 10.4% and 47.3% year over year.
Final Thought
In a nutshell, management is focused on creating a trend-right merchandise assortment, deepening relations with customers via marketing, enhancing the digital commerce agenda and efficiently controlling expenses. Such strengths might continue driving the company’s results ahead.
We believe this Zacks Rank #1 (Strong Buy) stock to be a lucrative investment bet now.
Gap, a leading apparel retailer, currently sports a Zacks Rank of 1. GPS delivered an average earnings surprise of 202.7% 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 current financial-year sales indicates growth of 0.2% from the year-ago reported figure.
Deckers, a footwear and accessories dealer, currently carries a Zacks Rank #2 (Buy). DECK delivered an average earnings surprise of 42.8% in the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 11.1% from the year-ago reported figure.
DICK'S Sporting, a sporting goods retailer, currently carries a Zacks Rank of 2. DKS delivered an average earnings surprise of 4.7% in the trailing four quarters.
The consensus estimate for DICK'S Sporting’s current financial-year sales indicates growth of 1.8% from the year-ago reported figure.
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Abercrombie's (ANF) Growth Moves Seem Prudent: Apt to Buy?
Abercrombie & Fitch Co. (ANF - Free Report) looks well-poised to tap the positive trends in the fashion arena, 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. Buoyed by such strengths, shares of this apparel and accessories dealer surged 41.2%, impressively outperforming the industry’s 5.8% growth in the past three months.
Markedly, the company has been experiencing strong sales growth across each of its brands and most of the regions. In the first quarter of fiscal 2024, net sales improved 12% year over year at Hollister and advanced 31% at Abercrombie. The Abercrombie brand contributed 56% to the total company sales while Hollister represented 44% of sales. Comparable sales grew 29% for Abercrombie and 13% for Hollister.
Abercrombie has been witnessing favorable margin trends too, mainly driven by lower freight costs and improved average unit retail. The gross margin expanded 540 basis points to 66.4% in the fiscal first quarter. Further, the company reported an operating income of $130 million, up from an adjusted operating income of $38 million in the year-ago period. Also, the operating margin of 12.7% was up significantly from 4.1% in the year-ago quarter.
As part of its store-optimization efforts, Abercrombie plans to reposition larger format flagship locations to smaller omnichannel-enabled stores. During the fiscal first quarter, it introduced a store, remodeled 13 stores and closed 13 stores. For the current fiscal year, management has raised the store investment plan and aims to deliver nearly 60 new stores, 65 remodels and right-sizes, and 40 closures.
Abercrombie notes that it is on track to achieve its 2024 target of demonstrating sustainable, profitable growth. The company expects to continue benefiting from strength in its brands, driven by its focus on delivering high-quality, on-trend assortments for new and existing customers across regions and brands. It has also been focused on making strategic investments across stores, digital and technology, which are slated to strengthen the company in the long term.
Image Source: Zacks Investment Research
Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for fiscal 2024 sales and earnings per share is currently pegged at $4.73 billion and $9.25, respectively. These estimates indicate corresponding growth of 10.4% and 47.3% year over year.
Final Thought
In a nutshell, management is focused on creating a trend-right merchandise assortment, deepening relations with customers via marketing, enhancing the digital commerce agenda and efficiently controlling expenses. Such strengths might continue driving the company’s results ahead.
We believe this Zacks Rank #1 (Strong Buy) stock to be a lucrative investment bet now.
Other Key Picks
We have highlighted three other top-ranked stocks, namely Gap (GPS - Free Report) , Deckers (DECK - Free Report) and DICK'S Sporting (DKS - Free Report) .
Gap, a leading apparel retailer, currently sports a Zacks Rank of 1. GPS delivered an average earnings surprise of 202.7% 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 current financial-year sales indicates growth of 0.2% from the year-ago reported figure.
Deckers, a footwear and accessories dealer, currently carries a Zacks Rank #2 (Buy). DECK delivered an average earnings surprise of 42.8% in the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 11.1% from the year-ago reported figure.
DICK'S Sporting, a sporting goods retailer, currently carries a Zacks Rank of 2. DKS delivered an average earnings surprise of 4.7% in the trailing four quarters.
The consensus estimate for DICK'S Sporting’s current financial-year sales indicates growth of 1.8% from the year-ago reported figure.