ANF's Brand Strength Drives Momentum: Is It the Right Time to Invest?
Abercrombie & Fitch Company ANF has all it takes to create a niche in the market. Its most prominent trait is its strong portfolio of well-established brands, which makes it one of the leading apparel companies in the world. The company’s Abercrombie and Hollister brands reflect strength driven by its focus on delivering high-quality, on-trend assortments for new and retained customers across regions and brands.
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.
Driven by these factors, this Zacks Rank #1 (Strong Buy) stock has outperformed the industry in the past year. ANF has rallied 152.4% compared with the industry’s growth of 32%. Abercrombie also compared favorably with the Retail-Wholesale sector’s growth of 35.4% and the S&P 500’s improvement of 33.7% in a year. A VGM Score of A further speaks volumes for the stock.
ANF's Stock Price Performance
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ANF’s current financial-year sales and earnings indicates growth of 13.1% and 63.4%, respectively, from the year-ago reported numbers.
What Places ANF Well?
Abercrombie has thrived through its consistent focus on providing premium, high-quality casual apparel for men, women, and children. Known for its appeal to teens, the brand has seen a resurgence in recent years, driven by rebranding efforts that strategically target millennials, with its main focus on jeans. This strategy has resulted in notable sales growth across all its brands, especially Abercrombie.
The company’s renewed emphasis on product quality and innovation has lured customers. It is actively updating its product lines to align with current fashion trends while preserving its classic, casual style, helping attract new customers and retain loyal ones.
Abercrombie is also optimizing its store network, shifting from large flagship stores to smaller, omni-channel-enabled locations, and closing underperforming stores to improve efficiency. In addition, the company has modernized its stores, making them more inviting and comfortable while enhancing its e-commerce platform with personalized recommendations, easy navigation, and seamless returns.
These initiatives have strengthened Abercrombie’s financial performance, with increases in both sales and profitability.
Abercrombie's strategic transformation has positioned it for sustainable, long-term growth. As it continues to innovate and adapt to market trends, it is well-poised to maintain its upward momentum and deliver value to shareholders.
ANF Outlines a Promising Outlook
Abercrombie is on track to meet its 2024 target of achieving sustainable, profitable growth. In addition to brand strength, the company expects to benefit from strategic investments in its stores, digital presence and technology. For the third quarter of fiscal 2024, net sales are projected to grow in the low double digits year over year. The company’s operating margin is forecasted to be in the range of 13-14% compared with 13.1% reported in the third quarter of fiscal 2023.
With strong first-half results for fiscal 2024, Abercrombie remains confident in its sales and operating margin outlook. The company anticipates a 12-13% increase in net sales for fiscal 2024 compared with the $4.3 billion reported last year. The Abercrombie brand is expected to continue outperforming Hollister, with the Americas region driving growth.
For fiscal 2024, Abercrombie forecasts an operating margin of 14-15%, an improvement from the previously mentioned 14%, driven by gross margin expansion and improved operating expense management.
Conclusion
Abercrombie is poised to benefit from its strategic focus on brand strength, innovation, and targeted investments in key areas such as digital, technology, and store optimization. With promising sales growth, improved operating margins, and strong regional performance, Abercrombie is well-poised to achieve its 2024 goals and deliver sustainable, profitable growth in the long term.
3 Promising Stocks
A few other top-ranked stocks are Genesco GCO, Nordstrom JWN and Shoe Carnival SCVL.
Genesco is a specialty retailer of footwear and accessories. The company currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Genesco’s current fiscal-year earnings indicates growth of 17.9% from the previous year’s reported figure. GCO has a trailing four-quarter earnings surprise of 3%, on average.
Nordstrom is a leading fashion specialty retailer in the United States. The company currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Nordstrom’s current fiscal-year sales implies growth of 0.6% year over year, while the earnings estimate suggests a decline of 10.4% from the previous year’s reported number. JWN has a trailing four-quarter negative earnings surprise of 17.8%, on average.
Shoe Carnival is one of the nation's largest family footwear retailers, offering a broad assortment of moderately priced dress, casual and athletic footwear for men, women and children. It carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Shoe Carnival’s current fiscal-year sales calls for growth of 5.1% from the previous year’s reported figure. SCVL has a trailing four-quarter negative earnings surprise of 1.8%, on average.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
Nordstrom, Inc. (JWN) : Free Stock Analysis Report
Shoe Carnival, Inc. (SCVL) : Free Stock Analysis Report
Genesco Inc. (GCO) : Free Stock Analysis Report