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On Wednesday, Jefferies analyst Corey Tarlowe adjusted the price target for Abercrombie & Fitch (NYSE:ANF) shares, decreasing it to $170 from the previous $220, while continuing to endorse the stock with a Buy rating. Tarlowe pointed out that the Abercrombie brand has shown negative trends in February, and existing inventory issues have led to markdowns. However, Tarlowe believes these challenges are temporary.
Tarlowe expressed confidence that Abercrombie & Fitch could achieve nearly 15% EBIT margins by 2025, translating to an earnings per share (EPS) of $11.35, alongside a share buyback program of $400 million, which is just under 10% of the company’s current market capitalization of approximately $4.1 billion. He also highlighted that the company carries no debt, which is a positive sign for investors.
Despite the lowered price target, the analyst emphasized that Abercrombie & Fitch’s shares are trading at a price-to-earnings (P/E) ratio of 7, which is significantly lower than the five-year average of 14. Tarlowe mentioned that the stock’s multiple has been halved, suggesting that now is an opportune time to purchase shares.
The decision to moderate the price target was attributed to a lower multiple, according to Tarlowe. This adjustment comes as Abercrombie & Fitch navigates through the current retail environment, which has seen the brand struggling with recent trends and inventory management. Nonetheless, Jefferies maintains a positive outlook on the stock’s potential performance.
In other recent news, Abercrombie & Fitch reported strong financial results for the first quarter of 2025, with earnings per share (EPS) of $3.57, narrowly beating the forecast of $3.56. The company’s revenue reached $1.58 billion, surpassing the anticipated $1.56 billion. Despite these positive earnings, the stock experienced a notable decline in pre-market trading, attributed to broader market concerns. Over the past year, Abercrombie & Fitch achieved a 16% growth in net sales, totaling $4.95 billion, and reported a significant 53% increase in operating income. The company projects net sales growth of 3-5% for 2025, with plans to open approximately 100 new store experiences. Analyst firms have not provided new ratings, but the company’s financial health remains robust, with a free cash flow of $527 million. Abercrombie & Fitch continues to focus on strategic partnerships and product launches, including collaborations with the NFL and Formula One, to drive future growth.
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