Abercrombie & Fitch (ANF) is among the hottest stocks in 2024, rising 71.7% year-to-date. The company operates as an omnichannel retailer in the U.S., Europe, the Middle East, Asia, Canada, and other international markets. Valued at $7.87 billion by market cap, ANF offers an assortment of apparel, personal care products, and accessories for men, women, and kids under multiple brands.
ANF stock has surged more than 560% since the start of 2023, outpacing the broader markets by a wide margin.
Let’s see what’s driving this retail stock higher, and whether ANF remains a good investment choice at current levels.
ANF Reports Strong Q1 Results
Despite lower consumer spending and a challenging macro environment, Abercrombie & Fitch reported net sales of $1 billion in Q1 of 2024, up 22% year over year. Moreover, comparable sales growth stood at 21%, resulting in record Q1 sales for the company.
Its operating margin stood at 12.7%, an increase of 860 basis points year over year. Management raised its full-year outlook to net sales growth of 10% and an operating margin of roughly 14%. Abercrombie reported adjusted earnings per share of $2.14 in Q1, significantly above estimates of $1.74 - driving shares higher by 24% in a single trading session on May 29.
Abercrombie’s stellar Q1 results reflect its brand proposition and strong execution. It successfully navigated seasonal transitions with appropriate assortments and compelling marketing, as the Abercrombie brands registered 31% growth while Hollister brand sales were up 12%.
In recent months, the company has focused on inventory discipline and operational efficiencies, which has improved the bottom line.
Company CEO Fran Horowitz stated, “Our brands are delivering high-quality, on-trend assortments for new and retained customers across regions and brands. Importantly, we continue to make strategic investments across stores, digital and technology to further strengthen the company in pursuit of our long-term ambition.”
Abercrombie Has Staged a Turnaround
Abercrombie & Fitch has increased its sales from $3.12 billion in 2020 to $4.28 billion in 2023. Similar to other retail companies, Abercrombie focused on widening its e-commerce capabilities amid COVID-19, and digital sales accounted for 60% of total sales in 2023.
In recent years, the company has aimed to transform itself from an exclusionary retailer to an inclusive one geared towards millennials. Abercrombie has changed its product assortment, overhauled its stores, and relied on influencers to reach the target audience.
ANF is also looking at international markets as a key growth channel, as sales in the EMEA (Europe, Middle East, and Africa) region grew by 19%.
Is ANF Stock Undervalued?
Abercrombie & Fitch is forecast to expand earnings per share from $6.28 in 2023 to $9.25 in 2024 and $9.44 in 2025, according to consensus price estimates.
Wall Street forecasts adjusted earnings to increase to $15 per share in 2028. So, if the stock is priced at 15x forward earnings, ANF should trade around $225 in July 2028.
Out of the eight analysts tracking ANF stock, three recommend “strong buy” and five recommend “hold.” The average 12-month target price for the stock is $195.33, about 29% higher than the current trading price.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
