Abercrombie and Fitch's (NYSE:ANF) Q4 Sales Beat Estimates But Stock Drops

Kayode Omotosho /
2024/03/06 7:36 am EST

Young adult apparel retailer Abercrombie & Fitch (NYSE:ANF) reported Q4 FY2023 results exceeding Wall Street analysts' expectations, with revenue up 21.1% year on year to $1.45 billion. It made a non-GAAP profit of $2.97 per share, improving from its profit of $0.81 per share in the same quarter last year.

Is now the time to buy Abercrombie and Fitch? Find out by accessing our full research report, it's free.

Abercrombie and Fitch (ANF) Q4 FY2023 Highlights:

  • Revenue: $1.45 billion vs analyst estimates of $1.43 billion (1.5% beat)
  • EPS (non-GAAP): $2.97 vs analyst estimates of $2.85 (4.4% beat)
  • Guidance for full year 2024 slightly ahead for revenue and operating profit
  • Free Cash Flow of $145.5 million, down 42.9% from the same quarter last year
  • Gross Margin (GAAP): 62.9%, up from 55.7% in the same quarter last year
  • Same-Store Sales were up 16% year on year (roughly in line)
  • Market Capitalization: $7.05 billion

Fran Horowitz, Chief Executive Officer, said, “I am incredibly proud of how we performed throughout fiscal 2023, finishing with fourth quarter year-over-year net sales growth of 21%, which exceeded our January business update expectations. Our strong fourth quarter was fueled by sales growth across regions and brands. Abercrombie brands grew net sales 35%, continuing an impressive multi-quarter growth trend, while Hollister brands grew 9%, delivering a third consecutive quarter of sales growth. By staying close to our customers, tightly controlling inventories and continuing to operate with financial discipline, our team delivered year-over-year fourth quarter operating margin expansion of 800 basis points, reaching 15.3%.

Founded as an outdoor and sporting brand, Abercrombie & Fitch (NYSE:ANF) evolved to become a specialty retailer that sells its own brand of fashionable clothing to young adults.

Apparel Retailer

Apparel sales are not driven so much by personal needs but by seasons, trends, and innovation, and over the last few decades, the category has shifted meaningfully online. Retailers that once only had brick-and-mortar stores are responding with omnichannel presences. The online shopping experience continues to improve and retail foot traffic in places like shopping malls continues to stall, so the evolution of clothing sellers marches on.

Sales Growth

Abercrombie and Fitch is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the other hand, it has an edge over smaller competitors with fewer resources and can still flex high growth rates because it's growing off a smaller base than its larger counterparts.

As you can see below, the company's annualized revenue growth rate of 4.3% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was weak , but to its credit, it opened new stores and grew sales at existing, established stores.

Abercrombie and Fitch Total Revenue

This quarter, Abercrombie and Fitch reported remarkable year-on-year revenue growth of 21.1%, and its $1.45 billion in revenue topped Wall Street's estimates by 1.5%. Looking ahead, Wall Street expects sales to grow 4.3% over the next 12 months, a deceleration from this quarter.

When a company has more cash than it knows what to do with, buying back its own shares can make a lot of sense–as long as the price is right. Luckily, we’ve found one, a low-priced stock that is gushing free cash flow AND buying back shares. Click here to claim your Special Free Report on a fallen angel growth story that is already recovering from a setback.

Same-Store Sales

Abercrombie and Fitch's demand within its existing stores has generally risen over the last two years but lagged behind the broader consumer retail sector. On average, the company's same-store sales have grown by 6.8% year on year. With positive same-store sales growth amid an increasing physical footprint of stores, Abercrombie and Fitch is reaching more customers and growing sales.

Abercrombie and Fitch Year On Year Same Store Sales Growth

In the latest quarter, Abercrombie and Fitch's same-store sales rose 16% year on year. This growth was an acceleration from the 2.3% year-on-year increase it posted 12 months ago, which is always an encouraging sign.

Key Takeaways from Abercrombie and Fitch's Q4 Results

We were impressed that Abercrombie and Fitch beat on revenue, gross margin, and EPS. Full year guidance for revenue and operating profit were also slightly ahead of expectations. Overall, we think this was a strong quarter that should satisfy shareholders. The stock is flat after reporting and currently trades at $139 per share.

So should you invest in Abercrombie and Fitch right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.