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Abercrombie (ANF) Plunges 19% in a Month: Should You Buy Now?
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After experiencing more than 250% surge in a year, Abercrombie & Fitch Company's (ANF - Free Report) shares have recently pulled back, with an 18.9% decline in the past month. This downturn followed the announcement about its promotion to the S&P MidCap 400, replacing Equitrans Midstream Corp. (“ETRN”), effective Jul 22, 2024.
Simultaneously, Abercrombie was replaced by Gates Industrial Corporation plc (GTES - Free Report) on the S&P SmallCap 600. Market experts point out that such a promotion to the S&P MidCap 400 often leads to a fall in stock price, as the S&P SmallCap 600 typically attracts more investment through mutual funds and ETFs.
After the decline, the New Albany, OH-based company has underperformed its industry peers, the broader sector and the S&P 500 Index in a month. Abercrombie’s decline is steeper than the industry's fall of 3.3%. It also shows an underperformance compared with the broader Zacks Retail-Wholesale sector and the S&P 500's respective declines of 6.5% and 6% in the same period.
Image Source: Zacks Investment Research
Additionally, the stock performance presents a sharp contrast with its competitor, American Eagle Outfitters Inc. (AEO - Free Report) , which saw a 3.4% gain in the past month. It also underperformed Urban Outfitters Inc’s (URBN - Free Report) decline of 9.7% in the same period.
ANF’s current price of $141.08 reflects a 39.6% discount from its 52-week high of $196.99 reached on May 29, 2024. This indicates that the stock has further upside potential.
Additionally, this apparel retailer’s stock has slipped below critical technical thresholds, such as its 50-day and 200-day moving averages, which are important indicators for gauging market trends and momentum. These raise investor concerns regarding ANF’s ability to navigate current market dynamics.
Abercrombie’s Trades Below 50 and 200-Day Moving Average
Image Source: Zacks Investment Research
At this point, investors are questioning whether Abercrombie can bounce back from the recent decline by leveraging its strong fundamentals and growth strategies.
Is a Recovery on the Horizon? Analyzing ANF's Core Strengths
Abercrombie has crafted a remarkable success story in recent years, driven by its steadfast commitment to offering premium, high-quality casual apparel for men, women and children. After losing market share in 2010, the company made a strong comeback through rebranding efforts, with a strategic focus on jeans for millennials. This approach revitalized sales across all its brands, particularly the Abercrombie brand.
The company has capitalized on favorable trends in the fashion industry through digital initiatives and robust strategies, including store optimization plans.
Through its strategic transformation, Abercrombie has reinvented its brands and regained its position in the retail market over the past two years. The company refreshed its product lines to align with current fashion trends while maintaining its legacy of a classic, casual style, attracting new customers and retaining loyal ones.
Management's renewed focus on product quality and innovation has also played a crucial role in Abercrombie's resurgence. A key part of this transformation involved shifting the brand’s image from exclusivity to inclusivity, featuring a more diverse range of models in advertising campaigns and offering a broader array of sizes.
In addition, Abercrombie modernized its stores, transforming them into inviting, comfortable spaces that encourage shoppers to linger and explore. The company also invested in a seamless e-commerce platform that offers personalized recommendations, easy navigation and hassle-free returns. These strategic initiatives have led to improved financial performance, with significant increases in sales and profitability.
Overall, Abercrombie's strategic transformation has set the company on a path of sustainable, profitable growth for the long term. As it continues to innovate and adapt to market trends, Abercrombie is well-positioned to maintain its upward trajectory and deliver value to shareholders.
Upward Estimate Trajectory
For fiscal 2024, the Zacks Consensus Estimate for ANF’s sales and EPS implies 11.1% and 51.1% year-over-year growth, respectively. The consensus mark for fiscal 2025 sales and earnings indicates 4.6% and 2% year-over-year growth, respectively.
The Zacks Consensus Estimate for ANF’s fiscal 2024 and 2025 earnings per share has risen 2.6% and 2.5%, respectively, in the past 30 days. The upward revision in earnings estimates indicates analysts’ confidence in the stock.
Image Source: Zacks Investment Research
Is Abercrombie’s Premium Valuation Justified?
Abercrombie is currently trading at a significant premium to the industry peers on a forward 12-month price-to-sales (P/S), as evidenced by its forward 12-month P/S of 1.48X. The current valuation is above its five-year median of 0.42X and surpasses the broader industry’s multiple of 1.03X. After the recent decline in share price, we note that the company’s valuation P/S multiple has retracted slightly from 1.89X recorded a month ago.
Image Source: Zacks Investment Research
While the premium valuation suggests that shares are somewhat expensive on a relative basis, the premium is justified due to Abercrombie’s consistent financial performance and growth prospects driven by its successful rebranding efforts and strategic focus on key products.
What Should Investors Do Now?
Abercrombie’s underlying fundamentals demonstrate its exceptional financial health and operational efficiency. Its robust transformation strategies, including rebranding, digital expansion and store-related efforts, should drive sustained growth in the future. These attributes make the stock an appealing investment option, especially after the recent dip.
Image: Bigstock
Abercrombie (ANF) Plunges 19% in a Month: Should You Buy Now?
After experiencing more than 250% surge in a year, Abercrombie & Fitch Company's (ANF - Free Report) shares have recently pulled back, with an 18.9% decline in the past month. This downturn followed the announcement about its promotion to the S&P MidCap 400, replacing Equitrans Midstream Corp. (“ETRN”), effective Jul 22, 2024.
Simultaneously, Abercrombie was replaced by Gates Industrial Corporation plc (GTES - Free Report) on the S&P SmallCap 600. Market experts point out that such a promotion to the S&P MidCap 400 often leads to a fall in stock price, as the S&P SmallCap 600 typically attracts more investment through mutual funds and ETFs.
After the decline, the New Albany, OH-based company has underperformed its industry peers, the broader sector and the S&P 500 Index in a month. Abercrombie’s decline is steeper than the industry's fall of 3.3%. It also shows an underperformance compared with the broader Zacks Retail-Wholesale sector and the S&P 500's respective declines of 6.5% and 6% in the same period.
Image Source: Zacks Investment Research
Additionally, the stock performance presents a sharp contrast with its competitor, American Eagle Outfitters Inc. (AEO - Free Report) , which saw a 3.4% gain in the past month. It also underperformed Urban Outfitters Inc’s (URBN - Free Report) decline of 9.7% in the same period.
ANF’s current price of $141.08 reflects a 39.6% discount from its 52-week high of $196.99 reached on May 29, 2024. This indicates that the stock has further upside potential.
Additionally, this apparel retailer’s stock has slipped below critical technical thresholds, such as its 50-day and 200-day moving averages, which are important indicators for gauging market trends and momentum. These raise investor concerns regarding ANF’s ability to navigate current market dynamics.
Abercrombie’s Trades Below 50 and 200-Day Moving Average
Image Source: Zacks Investment Research
At this point, investors are questioning whether Abercrombie can bounce back from the recent decline by leveraging its strong fundamentals and growth strategies.
Is a Recovery on the Horizon? Analyzing ANF's Core Strengths
Abercrombie has crafted a remarkable success story in recent years, driven by its steadfast commitment to offering premium, high-quality casual apparel for men, women and children. After losing market share in 2010, the company made a strong comeback through rebranding efforts, with a strategic focus on jeans for millennials. This approach revitalized sales across all its brands, particularly the Abercrombie brand.
The company has capitalized on favorable trends in the fashion industry through digital initiatives and robust strategies, including store optimization plans.
Through its strategic transformation, Abercrombie has reinvented its brands and regained its position in the retail market over the past two years. The company refreshed its product lines to align with current fashion trends while maintaining its legacy of a classic, casual style, attracting new customers and retaining loyal ones.
Management's renewed focus on product quality and innovation has also played a crucial role in Abercrombie's resurgence. A key part of this transformation involved shifting the brand’s image from exclusivity to inclusivity, featuring a more diverse range of models in advertising campaigns and offering a broader array of sizes.
In addition, Abercrombie modernized its stores, transforming them into inviting, comfortable spaces that encourage shoppers to linger and explore. The company also invested in a seamless e-commerce platform that offers personalized recommendations, easy navigation and hassle-free returns. These strategic initiatives have led to improved financial performance, with significant increases in sales and profitability.
Overall, Abercrombie's strategic transformation has set the company on a path of sustainable, profitable growth for the long term. As it continues to innovate and adapt to market trends, Abercrombie is well-positioned to maintain its upward trajectory and deliver value to shareholders.
Upward Estimate Trajectory
For fiscal 2024, the Zacks Consensus Estimate for ANF’s sales and EPS implies 11.1% and 51.1% year-over-year growth, respectively. The consensus mark for fiscal 2025 sales and earnings indicates 4.6% and 2% year-over-year growth, respectively.
The Zacks Consensus Estimate for ANF’s fiscal 2024 and 2025 earnings per share has risen 2.6% and 2.5%, respectively, in the past 30 days. The upward revision in earnings estimates indicates analysts’ confidence in the stock.
Image Source: Zacks Investment Research
Is Abercrombie’s Premium Valuation Justified?
Abercrombie is currently trading at a significant premium to the industry peers on a forward 12-month price-to-sales (P/S), as evidenced by its forward 12-month P/S of 1.48X. The current valuation is above its five-year median of 0.42X and surpasses the broader industry’s multiple of 1.03X. After the recent decline in share price, we note that the company’s valuation P/S multiple has retracted slightly from 1.89X recorded a month ago.
Image Source: Zacks Investment Research
While the premium valuation suggests that shares are somewhat expensive on a relative basis, the premium is justified due to Abercrombie’s consistent financial performance and growth prospects driven by its successful rebranding efforts and strategic focus on key products.
What Should Investors Do Now?
Abercrombie’s underlying fundamentals demonstrate its exceptional financial health and operational efficiency. Its robust transformation strategies, including rebranding, digital expansion and store-related efforts, should drive sustained growth in the future. These attributes make the stock an appealing investment option, especially after the recent dip.
Abercrombie currently sports a Zacks Rank #1 (Strong Buy) and boasts a Value Score of B, making it an attractive investment option, according to Zacks' proprietary methodology. You can see the complete list of today's Zacks #1 Rank stocks here.