S&P 500 eases slightly from fresh record high after stronger economic growth
On Tuesday, Citi maintained its Neutral rating on Abercrombie & Fitch (NYSE:ANF) with a steady price target of $190.00. The firm's outlook for the retailer's second-quarter performance, which is set to be reported before the market opens on August 28, is optimistic due to expected strong sales and gross margin (GM) growth.
The analysis suggests that Abercrombie & Fitch, along with its Hollister brand, may have continued their double-digit comparable sales momentum into the second quarter, supported by on-trend fashion offerings and an acceleration in Hollister Men’s sales.
The analyst from Citi predicts robust average unit retail (AUR) growth, which should contribute to a solid gross margin, as the company strategically reduces promotional activities. Management is anticipated to increase its fiscal year 2024 sales guidance from an increase of 10% to 12%, which could translate into an earnings per share (EPS) guidance of over $10.00. This projection exceeds the consensus estimate of $9.78 and is in line with the more optimistic expectation of over $10.50 from bullish investors.
Despite a dip in shares following weaker third-party credit card data in July, the analysis sees no evidence of slowing momentum for either the Abercrombie or Hollister brands. The report concludes with a positive outlook on the risk/reward balance for Abercrombie & Fitch's stock heading into the second-quarter earnings announcement, citing significant potential earnings upside compared to consensus estimates for the current year.
In other recent news, Abercrombie & Fitch reported robust earnings and revenue results, with net sales reaching $1 billion and an operating income of $130 million, reflecting a 22% year-over-year sales increase. The company also strengthened its financial position by expanding its credit facility to $500 million and fully redeeming its 8.75% Senior Secured Notes due 2025, totaling a principal amount of $213,906,000.
Abercrombie & Fitch has also engaged in strategic partnerships, including a collaboration with Haddad Brands to expand the global distribution and product range of its Abercrombie Kids line. The expanded offerings are expected to reach Haddad Brands’ global showrooms by the Fall/Back to School 2025 season.
Analysts have also been active, with JPMorgan upgrading Abercrombie & Fitch's stock from Neutral to Overweight and raising the price target to $194. The firm anticipates continued widespread demand for the brand and predicts a robust earnings per share (EPS) performance for the second quarter, surpassing consensus estimates.
Citi has also reiterated its Neutral rating on Abercrombie & Fitch, predicting a strong Q2 performance driven by solid sales and gross margin. The firm expects a continuation of double-digit comparable sales growth into the second quarter, with an anticipated upward revision of the fiscal year 2024 sales guidance from a 10% increase to 12%. These are some of the recent developments for Abercrombie & Fitch.
InvestingPro Insights
As Abercrombie & Fitch (NYSE:ANF) prepares to report its second-quarter performance, real-time data from InvestingPro offers a comprehensive view of the company's financial health and market position. With a market capitalization of $8.53 billion and a P/E ratio sitting at 19.99, the company showcases stability in its valuation metrics. The adjusted P/E ratio for the last twelve months as of Q1 2025 slightly lower at 19.76, reflecting consistent earnings relative to share price.
InvestingPro Tips highlight several positive aspects of Abercrombie & Fitch's recent performance. Analysts have revised their earnings upwards for the upcoming period, indicating confidence in the company's potential to surpass expectations. Additionally, the company has demonstrated impressive gross profit margins, with the last twelve months as of Q1 2025 showing a robust 64.07%. This aligns with Citi's anticipation of strong sales and gross margin growth. Moreover, Abercrombie & Fitch has experienced a significant return over the last week, with a price total return of 8.66%, which may signal investor optimism ahead of the earnings report.
Investors looking for deeper analysis and additional insights can find them on InvestingPro, which includes a suite of 15 more InvestingPro Tips related to Abercrombie & Fitch's performance and projections. These tips provide a more nuanced understanding of the company's financial position, market trends, and potential investment opportunities.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.