Abercrombie & Fitch (ANF) is set to report its fiscal first-quarter results on May 29, with expectations of lower revenues and earnings compared to market expectations. Despite a 72% increase in ANF stock since the beginning of the year, outperforming the broader indices, the company’s FY’23 results exceeded expectations with earnings of $6.22 per share and an operating margin increase to 11.5%. ANF’s gains were driven by strong results in its namesake unit and Hollister brand. However, the stock is currently fully priced with a P/E of 24.1x and management’s guidance for only a 4-6% sales increase this year, leading to potential moderate declines in the near term.
ANF stock has shown significant gains over the past few years, with a 650% increase from early 2021 to around $150 currently. However, the stock’s performance has been volatile, with returns of 71% in 2021, -34% in 2022, and 285% in 2023. ANF has underperformed the S&P 500 in 2022, raising questions about its future performance in the uncertain macroeconomic environment. With increasing competition and industry risks, ANF may face challenges in maintaining its growth trajectory and outperforming the market in the coming months.
Trefis estimates ANF’s Q1 2024 revenues to be around $957 million, slightly below consensus estimates. The company saw strong sales growth in the holiday quarter, driven by the Abercrombie brand, with comparable sales up 16% and Hollister seeing a 6% increase. Despite the revenue growth, ANF’s EPS is expected to miss consensus estimates, with Trefis projecting earnings per share of $1.69 for Q1. The company’s net income tripled from year-ago levels to $2.97 per share in Q4, indicating strong bottom-line performance.
Based on Trefis’ valuation, ANF’s stock price estimate is lower than the current market price, with a projected price of $127, which is 16% lower than the current market price. The company’s earnings per share estimate for fiscal 2024 is $7.68, with a P/E multiple of 16.6x. ANF’s peers in the retail sector are also analyzed to provide a comprehensive comparison of the company’s performance and valuation metrics. As investors navigate the uncertain economic landscape, it will be crucial to monitor ANF’s financial performance and strategic initiatives to assess its future growth prospects and potential market outperformance.
