Up 5x Over The Last Twelve Months, Where Is Abercrombie & Fitch Stock Headed?

Abercrombie & Fitch Stock Soars but Faces Uncertainty

Note: ANF’s FY’23 ended on February 3, 2024.

Investors in Abercrombie & Fitch (NYSE: ANF) have been on a thrilling roller-coaster ride over the past twelve months. The specialty retailer, known for its casual clothing and footwear, has seen its stock price skyrocket nearly 5x to around $130 per share. Surpassing the S&P’s 30% growth, ANF has defied expectations, with fiscal year 2023 earnings coming in at an impressive $6.22 per share, a substantial leap from a mere 5 cents in FY’22. This surge can be attributed to exceptional performance in both its namesake unit and Hollister brand, along with a strategic reduction in promotional activity, resulting in higher margins.

ANF’s Volatile Performance and Market Comparisons

Despite its remarkable growth, ANF’s stock has been far from steady, with notable fluctuations over the years. While the stock outperformed the S&P 500 by a significant margin in 2023, it had a rocky journey, with a 71% return in 2021, a -34% slump in 2022, and a resurgence to 285% in 2023. Notably, the consumer discretionary sector giants such as Amazon, Tesla, and Toyota have also faced challenges in consistently beating the S&P. In contrast, the diversified Trefis High Quality Portfolio has consistently outperformed the market, showcasing the benefits of balanced investment strategies.

Strong Holiday Quarter Lifts ANF’s Prospects

In the critical holiday quarter, ANF reported a robust 21% year-over-year sales growth to $1.5 billion, driven by a stellar performance of its Abercrombie brand. With a 16% increase in comparable sales across the company, driven by a 28% surge in the namesake brand and a 6% rise in Hollister, ANF showcased its strong market presence. A standout highlight was Abercrombie brand’s revenue spike of 35% to $755 million, fueled by its popularity among students and remarkable growth in its women’s business. Meanwhile, Hollister delivered its third consecutive quarter of sales growth, establishing itself as a revenue powerhouse for the company, overshadowing its parent brand for the first time in FY’23.

Future Outlook and Valuation

Looking ahead, we have revised ANF’s valuation to $127 per share, projecting an adjusted EPS of $7.68 and a 16.6x P/E multiple for fiscal year 2024. With estimated revenues of around $4.5 billion for the same year, reflecting a 6% year-over-year growth, ANF is poised for continued success. Amidst an uncertain economic landscape marked by high oil prices and elevated interest rates, ANF’s ability to outperform the market remains a point of intrigue for investors.

Comparative Analysis with Peers

For investors seeking peer comparisons, it is advisable to evaluate ANF relative to its industry counterparts. Understanding how ANF’s peers fare on key metrics can provide valuable insights into its competitive positioning and growth potential. Explore Peer Comparisons for a comprehensive analysis of industry players.

[1] Returns as of 3/19/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.