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On Thursday, Citi analysts, led by Paul Lejeuz, reduced the price target on Abercrombie & Fitch stock (NYSE:ANF) to $160 from the previous $190, while maintaining a Buy rating. The revision comes ahead of the company’s fourth-quarter earnings report, expected before the market opens on March 5. Lejeuz anticipates that Abercrombie & Fitch will surpass the consensus earnings per share (EPS) estimate of $3.53, predicting a $3.61 outcome. This forecast is based on projections of slightly stronger sales and margins than the range pre-announced for the fourth quarter.
Abercrombie & Fitch shares have fallen 30% year-to-date, driven by concerns that comparable store sales (comps) might turn negative in fiscal year 2025 (F25). Despite these concerns, Citi views the current risk/reward profile for the stock as very attractive, citing a forward price-to-earnings (P/E) multiple of 8.5 times for F25. The firm’s optimism is partly due to expectations of warmer weather in key markets and the fact that the majority of first-quarter sales are still forthcoming.
Management at Abercrombie & Fitch is expected to provide conservative guidance for F25. However, Citi anticipates that the company will continue to see outsized comp growth in its Hollister brand through at least the first half of F25, which should support mid-single-digit (MSD) total company comp growth for the fiscal year. The fast-turning inventory model at Abercrombie & Fitch is also seen as a protective measure against margin downside.
Furthermore, Citi suggests that there is potential for management to increase share repurchases, given the recent weakness in the stock. This strategy could provide additional support to the company’s fiscal year 2025 consensus estimates. The firm’s analysis includes consideration of external factors such as weak February third-party industry data, which has already been factored into the current negativity surrounding the stock.
In other recent news, Abercrombie & Fitch Co. has announced an upward revision of its net sales forecast for both the fourth quarter and the full fiscal year of 2024. The company now expects fourth-quarter net sales growth to range from 7% to 8%, an increase from the previous estimate of 5% to 7%. For the full year, Abercrombie & Fitch anticipates net sales growth of around 15%, up from the earlier forecast of 14% to 15%. Despite the positive sales outlook, UBS has adjusted its price target for Abercrombie & Fitch to $210 from $220, while maintaining a Buy rating, citing a modest reduction in anticipated earnings per share for fiscal year 2026 and increased marketing expenditures. Meanwhile, William Blair has maintained a Market Perform rating on the stock, expressing caution about the company’s margin goals amid its expansion strategy. UBS remains optimistic, projecting a 20% compound annual growth rate in earnings per share over the next five years and reaffirming a $220 price target in an earlier report. CEO Fran Horowitz attributed the sales growth to strong performance during the holiday season and emphasized the company’s strategic initiatives and customer engagement efforts. Abercrombie & Fitch’s updated outlook suggests it is on track to exceed the financial targets set by its Always Forward Plan 2025.
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