Abercrombie & Fitch Company ANF stock has rolled down 21.8% in the past three months, marking a significant underperformance from the broader industry’s 3.5% rise. The stock’s dismal performance has also underperformed the Retail-Wholesale sector’s growth of 5.9% and the S&P 500’s rally of 1.9%.
ANF's Stock Price Performance
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The ANF stock also shows a remarkable downside against its industry peers like Shoe Carnival SCVL, American Eagle AEO and Boot Barn’s BOOT growth of 13.2%, 12.7%, and 27.7%, respectively, in the past year.
At the current price of $134.12, the ANF stock trades at a discount of 31.9% to its 52-week high of $196.99. The current stock price reflects a 152.1% premium from its 52-week low mark. ANF trades below its 50 and 200-day moving averages, indicating a bearish sentiment.
Abercrombie Stock Trades Below 50-Day & 200-Day Moving Averages
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What’s Hindering ANF’s Stock Performance?
The recent drop in the leading apparel retailer’s stock is driven by decreased investor confidence following its fiscal 2024 outlook, which signals a slowdown in revenue growth. The company projected 12-13% year-over-year sales growth, indicating a deceleration in the second half of fiscal 2024. At the mid-point of 12.5%, this forecast suggests a notable decline from 22% and 21% growth achieved in the first and second quarters, respectively, and below the 16% rise seen in fiscal 2023.
Management also pointed out during theearnings callthat fiscal 2024 is one week shorter than fiscal 2023, which is expected to reduce fourth-quarter sales by $80 million, or 5.5 percentage points, and impact full-year sales by $50 million, or 1.2 percentage points.
The company's operating margin guidance, projected at 14.5% at the mid-point, has raised concerns about economic uncertainties and the sustainability of its recent profit gains. This forecast indicates a decline of 100 basis points from the 15.5% margin reported in the second quarter of fiscal 2024.
ANF’s Upward Estimate Trajectory
Despite the company’s lower-than-anticipated guidance, its estimates have shown an uptrend in the past 30 days. The Zacks Consensus Estimate for ANF’s fiscal 2024 and 2025 earnings per share rose 1.5% and 2.5%, respectively, in the last 30 days. The upward revision in earnings estimates indicates that analysts have continued faith in the company’s growth potential.
For fiscal 2024, the Zacks Consensus Estimate for ANF’s sales and EPS implies 13.1% and 63.4% year-over-year growth, respectively. The consensus mark for fiscal 2025 sales and earnings indicates 5% and 1% year-over-year growth, respectively.
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Strategies Support ANF’s Positive Estimate Trend
Abercrombie’s positive estimate revision trend speaks well of its ability to achieve its target of demonstrating sustainable, profitable growth. The company continues to benefit from a robust brand performance, driven by its commitment to providing high-quality, on-trend assortments for new and loyal customers across various regions and brands. It has also been investing in stores, digital initiatives, and technology, which are slated to enhance the company's long-term strength.
The upward estimate trajectory is well-supported by its ability to capitalize on favorable fashion industry trends, digital initiatives and robust strategies, including store-optimization plans. Abercrombie has crafted an impressive success story in recent years through its rebranding efforts, with a strategic emphasis on jeans targeted at millennials. This focus has revitalized sales across all its brands, especially the Abercrombie label.
Management's renewed commitment to product quality and innovation has been pivotal in the company's resurgence. Abercrombie has also modernized its stores, creating inviting and comfortable environments that encourage shoppers to linger and explore. The company has also invested in a seamless e-commerce platform that provides personalized recommendations, easy navigation and hassle-free returns.
Abercrombie's strategic transformation has positioned the company for sustainable, profitable growth in the long term. As it continues to innovate and respond to market trends, the company is well-equipped to sustain its upward momentum and deliver value to shareholders.
Undervalued Stock: Is it 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 12.99X, reflecting a discount to the broader industry’s 16.63X multiple and the S&P 500’s ratio of 21.52X. The stock’s current Value Score of A further validates its appeal.
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Is Buying ANF Stock a Smart Choice Right Now?
ANF has demonstrated resilience and growth potential in its earnings outlook and solid fundamentals despite the ongoing macroeconomic challenges. The company’s financial strength and operational efficiency are reflected in its core fundamentals. With robust transformation strategies in place, Abercrombie is well-positioned for continued growth. Though the company's sales guidance may be concerning, it could simply reflect a natural slowdown following exceptional growth driven by its revival efforts and positive customer response in the previous period.
ANF’s recent stock decline may first seem alarming, but it could represent an opportunity for savvy investors. The current price offers an attractive entry point for those looking to invest in this profitable apparel retailer. For existing shareholders, holding onto the stock could yield strong long-term returns. 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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Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report
Shoe Carnival, Inc. (SCVL) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
