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The Zacks Consensus Estimate for ANF’s fiscal second-quarter revenues is pegged at $1.1 billion, suggesting 16.4% growth from that reported in the year-ago quarter. For fiscal second-quarter earnings, the consensus mark is pegged at $2.14 per share, implying a 94.6% increase from the $1.10 reported in the year-ago quarter. The consensus estimate for earnings has moved up by a penny in the past seven days.
Image Source: Zacks Investment Research
In the last reported quarter, Abercrombie's earnings beat the consensus estimate by 28.9%. Moreover, ANF has delivered an earnings surprise of 210.3%, on average, in the trailing four quarters.
Abercrombie & Fitch Company Price and EPS Surprise
Our proven model conclusively predicts an earnings beat for Abercrombie this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks before they are reported with our Earnings ESP Filter.
ANF has been gaining from continued momentum in the Abercrombie brand, improvement in the Hollister brand and store-optimization efforts. The company has noted that its efforts to improve the positioning of the Hollister brand have been paying off. Strategic investments across stores, digital and technology via its Always Forward Plan bode well.
The company's second-quarter fiscal 2024 results are anticipated to reflect the strength of its brands and robust demand for products that resonate with customers. Management is clearly focused on curating trend-right merchandise, strengthening customer relationships through marketing, advancing digital commerce and efficiently managing expenses.
On the last reported quarter’s earnings call, management anticipated continued strong sales growth for its brands and regions in the fiscal second quarter. It anticipated consolidated net sales to increase in the mid-teens from $935 million reported in the year-ago period.
Our model predicts second-quarter fiscal 2024 total revenues to increase 13.8% year over year. We expect sales for the Abercrombie brand to grow 18.7% year over year. Sales for Hollister are expected to improve 9% year over year.
We note that Abercrombie has been witnessing favorable margin trends, mainly driven by lower freight and raw material expenses, and improved average unit retail (AUR).
For the second quarter of fiscal 2024, the company projected an operating margin of 13-14%, backed by a higher gross margin rate on continued benefits from cotton prices, improved AUR and modest expense leverage. We expect an adjusted operating margin of 13.5% for the fiscal second quarter, suggesting a year-over-year rise of 390 bps. Our model predicts the gross margin to expand 360 bps year over year to 66.1% in the fiscal second quarter.
However, Abercrombie has been witnessing elevated operating costs on higher technology expenses and incentive-based compensation. Additionally, inflation and increased investment for the 2025 Always Forward Plan initiatives are likely to have been concerning in the to-be-reported quarter. Our model estimates a year-over-year increase of 13.4% in adjusted operating expenses for the fiscal second quarter.
ANF’s Price Performance & Valuation
Abercrombie’s shares have exhibited an uptrend in the year-to-date period, leaving behind its industry peers and the Zacks Retail-Wholesale sector. Year to date, the New Albany, OH-based company’s shares have risen 93.7%, outperforming the industry and the sector’s growth of 9.7% and 13.3%, respectively.
Not only that, the Abercrombie stock has rallied ahead, leaving arch-rival American Eagle (AEO - Free Report) struggling with just 2.9% growth in the same period. Also, ANF’s stability stands out against competitors like Urban Outfitters’ (URBN - Free Report) 16.2% gain and Gap’s 17.4% rise in the year-to-date period.
Image Source: Zacks Investment Research
At the current price of $170.88, ANF trades close to the 52-week high of $196.99 attained on May 29. This represents a 13.3% discount to the 52-week high mark.
From the valuation standpoint, ANF trades at a forward 12-month P/E multiple of 17.81X, exceeding the industry average of 17.04X. Abercrombie’s valuation appears quite pricey.
While this might be perceived as a risk, 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.
Image Source: Zacks Investment Research
Investment Thesis
Abercrombie has crafted a compelling success story in recent years, driven by its unwavering commitment to delivering premium, high-quality casual apparel for men, women and children. The company made a strong comeback through rebranding efforts, with a strategic focus on jeans for millennials, which revitalized sales across all its brands, particularly the Abercrombie brand.
ANF has strengthened its market position by capitalizing on favorable fashion industry trends through digital initiatives and robust strategies, including store optimization plans. These strategic efforts have resulted in an improved financial performance, with significant increases in sales and profitability. Abercrombie's strategic transformation has set the stage for sustainable, long-term growth. As the company continues to innovate and adapt to market trends, it is well-positioned to maintain its upward momentum and deliver value to shareholders.
Conclusion
No matter how Abercrombie’s stock performs following the second-quarter fiscal 2024 results, it remains a solid long-term investment option due to its strong fundamentals. The company’s financial health and operational efficiency are evident in its underlying fundamentals. With robust transformation strategies, such as rebranding, digital expansion and store optimization, Abercrombie is well-positioned for sustained growth. These factors make the stock an attractive investment option, even before the fiscal second-quarter results are announced.
Image: Bigstock
Pre-Q2 Earnings: Is Abercrombie (ANF) a Portfolio Must-Have?
Abercrombie & Fitch Co. (ANF - Free Report) is scheduled to report second-quarter fiscal 2024 results on Aug 28, before the opening bell.
The Zacks Consensus Estimate for ANF’s fiscal second-quarter revenues is pegged at $1.1 billion, suggesting 16.4% growth from that reported in the year-ago quarter. For fiscal second-quarter earnings, the consensus mark is pegged at $2.14 per share, implying a 94.6% increase from the $1.10 reported in the year-ago quarter. The consensus estimate for earnings has moved up by a penny in the past seven days.
Image Source: Zacks Investment Research
In the last reported quarter, Abercrombie's earnings beat the consensus estimate by 28.9%. Moreover, ANF has delivered an earnings surprise of 210.3%, on average, in the trailing four quarters.
Abercrombie & Fitch Company Price and EPS Surprise
Abercrombie & Fitch Company price-eps-surprise | Abercrombie & Fitch Company Quote
Earnings Whispers
Our proven model conclusively predicts an earnings beat for Abercrombie this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks before they are reported with our Earnings ESP Filter.
Abercrombie currently has an Earnings ESP of +4.47% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Trends Leading Up to ANF’s Q2 Results
ANF has been gaining from continued momentum in the Abercrombie brand, improvement in the Hollister brand and store-optimization efforts. The company has noted that its efforts to improve the positioning of the Hollister brand have been paying off. Strategic investments across stores, digital and technology via its Always Forward Plan bode well.
The company's second-quarter fiscal 2024 results are anticipated to reflect the strength of its brands and robust demand for products that resonate with customers. Management is clearly focused on curating trend-right merchandise, strengthening customer relationships through marketing, advancing digital commerce and efficiently managing expenses.
On the last reported quarter’s earnings call, management anticipated continued strong sales growth for its brands and regions in the fiscal second quarter. It anticipated consolidated net sales to increase in the mid-teens from $935 million reported in the year-ago period.
Our model predicts second-quarter fiscal 2024 total revenues to increase 13.8% year over year. We expect sales for the Abercrombie brand to grow 18.7% year over year. Sales for Hollister are expected to improve 9% year over year.
We note that Abercrombie has been witnessing favorable margin trends, mainly driven by lower freight and raw material expenses, and improved average unit retail (AUR).
For the second quarter of fiscal 2024, the company projected an operating margin of 13-14%, backed by a higher gross margin rate on continued benefits from cotton prices, improved AUR and modest expense leverage. We expect an adjusted operating margin of 13.5% for the fiscal second quarter, suggesting a year-over-year rise of 390 bps. Our model predicts the gross margin to expand 360 bps year over year to 66.1% in the fiscal second quarter.
However, Abercrombie has been witnessing elevated operating costs on higher technology expenses and incentive-based compensation. Additionally, inflation and increased investment for the 2025 Always Forward Plan initiatives are likely to have been concerning in the to-be-reported quarter. Our model estimates a year-over-year increase of 13.4% in adjusted operating expenses for the fiscal second quarter.
ANF’s Price Performance & Valuation
Abercrombie’s shares have exhibited an uptrend in the year-to-date period, leaving behind its industry peers and the Zacks Retail-Wholesale sector. Year to date, the New Albany, OH-based company’s shares have risen 93.7%, outperforming the industry and the sector’s growth of 9.7% and 13.3%, respectively.
Not only that, the Abercrombie stock has rallied ahead, leaving arch-rival American Eagle (AEO - Free Report) struggling with just 2.9% growth in the same period. Also, ANF’s stability stands out against competitors like Urban Outfitters’ (URBN - Free Report) 16.2% gain and Gap’s 17.4% rise in the year-to-date period.
Image Source: Zacks Investment Research
At the current price of $170.88, ANF trades close to the 52-week high of $196.99 attained on May 29. This represents a 13.3% discount to the 52-week high mark.
From the valuation standpoint, ANF trades at a forward 12-month P/E multiple of 17.81X, exceeding the industry average of 17.04X. Abercrombie’s valuation appears quite pricey.
While this might be perceived as a risk, 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.
Image Source: Zacks Investment Research
Investment Thesis
Abercrombie has crafted a compelling success story in recent years, driven by its unwavering commitment to delivering premium, high-quality casual apparel for men, women and children. The company made a strong comeback through rebranding efforts, with a strategic focus on jeans for millennials, which revitalized sales across all its brands, particularly the Abercrombie brand.
ANF has strengthened its market position by capitalizing on favorable fashion industry trends through digital initiatives and robust strategies, including store optimization plans. These strategic efforts have resulted in an improved financial performance, with significant increases in sales and profitability. Abercrombie's strategic transformation has set the stage for sustainable, long-term growth. As the company continues to innovate and adapt to market trends, it is well-positioned to maintain its upward momentum and deliver value to shareholders.
Conclusion
No matter how Abercrombie’s stock performs following the second-quarter fiscal 2024 results, it remains a solid long-term investment option due to its strong fundamentals. The company’s financial health and operational efficiency are evident in its underlying fundamentals. With robust transformation strategies, such as rebranding, digital expansion and store optimization, Abercrombie is well-positioned for sustained growth. These factors make the stock an attractive investment option, even before the fiscal second-quarter results are announced.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.