Abercrombie & Fitch Company ANF has seen its shares rise 5.7% in the past week after it reported third-quarter 2024 results on Nov. 26, 2024. Meanwhile, the broader industry has grown 5.1% and the Retail-Wholesale sector has risen 0.7% in the past week. The increase followed strong third-quarter fiscal 2024 results and raised its fiscal 2024 outlook. Let’s review the company’s third-quarter results, outlook and other factors to assess if the stock presents a buying opportunity after the rally.
ANF’s Stock Performance
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In the third quarter of 2024, Abercrombie reported revenue and earnings growth, beating expectations. Adjusted earnings per share (EPS) rose 36.6% year over year, while net sales advanced 14%. This marked the sixth straight quarter of double-digit net sales growth. ANF’s comparable sales (comps) improved 16%. The top-line beat was driven by broad-based net sales growth across regions, brands and channels, led by strong traffic.
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In the third quarter of fiscal 2024, the company’s strong performance was fueled by substantial growth across regions and brands, especially in the Americas and the Abercrombie brand. Its earnings were supported by robust revenue growth and enhanced gross and operating margins.
Sales improved 14% year over year in the Americas, 15% in EMEA and 32% in APAC. This marked the sixth consecutive quarter of double-digit sales growth in the Americas and the fifth straight quarter of double-digit growth in EMEA. Sales growth in EMEA and APAC was driven by strength in London and Shanghai. In APAC, sales growth was led by strength in the digital platforms. Comps rose 16% each in the Americas and APAC regions, and EMEA registered 13% comps growth.
ANF’s Upbeat Forward Outlook Reflects Strength
Abercrombie is optimistic about the holiday season, citing strong early demand for its holiday collections. The company has provided an upbeat forecast for fourth-quarter fiscal 2024.
For the fourth quarter of fiscal 2024, ANF projects net sales to grow 5-7% year over year despite an $80 million headwind from a calendar shift and an extra 53rd week in fiscal 2023. Currency fluctuations are projected to reduce sales by 100 basis points. Adjusted for these factors, ANF anticipates sales growth of 11-13%, driven by robust performance across regions and brands.
Backed by fourth-quarter expectations and holiday season momentum, ANF has raised its fiscal 2024 sales forecast, expecting a 14-15% year-over-year increase. The loss of the 53rd week is estimated to lower fiscal 2024 sales by $50 million (1.2 percentage points), alongside minor currency-related impacts.
Abercrombie’s Estimates Indicate Uptrend
The Zacks Consensus Estimate for Abercrombie’s fiscal 2024 and 2025 EPS increased 1.6% and 3%, respectively, in the past seven days. The upward revision in earnings estimates indicates a bullish outlook for the stock.
The Zacks Consensus Estimate for Abercrombie’s fourth-quarter fiscal 2024 EPS rose 1.5% in the past seven days, highlighting optimism over the company’s near-term prospects.
For fiscal 2024, the Zacks Consensus Estimate for ANF’s sales and EPS implies 14.9% and 37.5% year-over-year growth, respectively. The consensus mark for fiscal 2025 sales and earnings indicates 5% and 3.9% year-over-year growth, respectively.
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Undervalued Stock: Is it an Opportune Time to Buy?
From a valuation perspective, ANF shares present an attractive opportunity, trading at a discount than historical and industry benchmarks. The recent pullback has brought Abercrombie's stock valuation to a level that appears more affordable and appealing.
The stock trades at a forward 12-month price-to-earnings (P/E) ratio of 14.27X, reflecting a discount to the broader industry’s 21.85X multiple and its three-year high of 121.44X. It stands below the S&P 500’s average of 22.62X. The stock also trades at a discount to its peers, including Deckers Outdoor DECK, Boot Barn BOOT and Torrid Holdings CURV, which are trading at forward 12-month P/E multiples of 34X, 23.75X and 15.78X, respectively.
Trading much below its three-year high and industry peers, the current valuation appears more affordable and appealing, presenting an opportunity to accumulate shares. The stock’s current Value Score of B further validates its appeal.
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At the current price of $154.97, the ANF stock trades at a 21.3% discount from its 52-week high of $196.99. This indicates that the stock has further upside potential from here.
Furthermore, ANF trades above its 50 and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in Abercrombie’s financial health and prospects.
Abercrombie Stock Trades Above 50 and 200-Day Moving Average
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Is Buying ANF Stock a Smart Choice Right Now?
Abercrombie's growth is bolstered by its ability to capitalize on favorable fashion trends, digital initiatives, and strong strategies like store optimization. The company’s solid fundamentals highlight its financial strength and operational efficiency. Its transformation efforts, including rebranding, digital expansion, and store enhancements, position it for sustained long-term growth. These factors make the ANF stock an attractive investment option.
Despite the recent surge in its share price, this profitable apparel retailer remains a bargain due to its relatively low valuation compared to peers. Abercrombie currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
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