Stock market today: S&P 500 hits fresh record close on stronger economic growth
On Wednesday, Citi analysts reiterated a Buy rating with a $98.00 price target on Abercrombie & Fitch shares (NYSE:ANF). The company’s first-quarter earnings per share (EPS) of $1.59 surpassed the consensus estimate of $1.37, attributed to a notable increase in Hollister comparable sales, which rose by 23% against the expected 11%. However, Abercrombie & Fitch’s own comparable sales fell by 10%, more than the anticipated 5% decline, underperforming market expectations.
Gross margin for the quarter declined by 440 basis points, weaker than the consensus and guidance which predicted a decrease of 330 to 350 basis points. This was likely due to higher-than-planned promotions at Abercrombie & Fitch, but was balanced by controlled expenditure. Management has revised its fiscal year 2025 earnings guidance to $10.00 at the midpoint, which is significantly above the market’s bearish projections. Second-quarter sales are expected to increase by 3-5%, also surpassing expectations.
Furthermore, Abercrombie & Fitch has actively engaged in stock buybacks, repurchasing $200 million worth of shares in the first quarter, contributing to a pre-market share price surge of over 20%. Despite a 20% increase in inventory, which seems excessive, and the implied second-quarter EBIT margin decline of 300 basis points indicating continued gross margin pressure, the fiscal year 2025 guidance suggests that the pressure on gross margin will ease in the second half of the year.
Analysts anticipate that Abercrombie & Fitch shares will trade higher today, buoyed by the better-than-expected guidance for the second quarter and the full fiscal year 2025.
In other recent news, Abercrombie & Fitch reported impressive first-quarter results for fiscal year 2025, surpassing earnings expectations with an earnings per share (EPS) of $1.59, higher than the anticipated $1.37. The company achieved record net sales of $1.1 billion, marking an 8% increase from the previous year, although slightly below the forecasted $1.08 billion. Raymond (NSE:RYMD) James analyst Rick Patel maintained an Outperform rating on Abercrombie & Fitch, with a price target of $90.00, citing the company’s effective cost management and strategic initiatives. The Hollister brand contributed significantly to the results, with a 22% rise in net sales, driven by strong performance in categories such as fleece, jeans, and skirts. Despite a decline in Abercrombie’s sales by 4%, the Americas, EMEA, and APAC regions all exceeded expectations. The company announced plans for 60 new store openings in 2025 and aims for approximately $400 million in share repurchases. Looking ahead, Abercrombie & Fitch expects full-year net sales growth between 3-6% and an operating margin of 12.5% to 13.5%. The company also addressed potential tariff impacts, estimating a $50 million effect on profitability, but remains optimistic about its strategic initiatives and market positioning.
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