Abercrombie and Fitch (ANF) Stock Trades Up, Here Is Why

Radek Strnad /
2024/01/08 11:43 am EST

What Happened:

Shares of young adult apparel retailer Abercrombie & Fitch (NYSE:ANF) jumped 7.3% in the morning session after the company provided a positive business update, raising its projections for net sales and operating margin for both the fourth quarter and full year of fiscal 2023. The company now expects Q4 revenue to grow in the high teens percent range year-on-year, a notable increase from the earlier forecast of low double-digit growth. Similarly, the full-year net sales outlook was revised upward to an implied 14.5% year-on-year growth at the midpoint, surpassing the previous expectation of 13% growth. 

CEO Fran Horowitz added, "...We expect to deliver fourth quarter net sales growth across regions led by continued strength in the Americas. Each of our brand continued to deliver solid sales growth led by Abercrombie brands. The Abercrombie & Fitch women's business is expected to achieve its highest-ever fourth quarter sales complemented by an acceleration in men's growth. At Hollister brands, we expect to deliver year-over-year fourth quar er sales growth led by the women's business.​.." The overall outlook was promising, given the macro challenges faced by retailers in the previous quarter.

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What is the market telling us:

Abercrombie and Fitch's shares are somewhat volatile and over the last year have had 14 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 5 months ago, when the stock gained 15.4% on the news that the company reported second quarter results that blew past Wall Street's expectations. Revenue beat by 11% while earnings per share also came in strong at $1.10 compared to analysts' estimates of $0.15. This impressive performance was driven by sales growth at Abercrombie brands and a huge operating margin increase. On top of that, the company raised its full-year revenue guidance from 3% growth all the way up to 10% while changing its operating margin estimate from 5.5% to 8.5%. Both of these are sizeable upward revisions you don't see too often. 

Lastly, management provided reassuring comments on the outlook for the second half of the year, stating, "While the macro environment remains dynamic, our first half results give us confidence to stay on offense for the second half. Consistent with our Always Forward Plan, we are continuing to open stores and make critical long-term investments in digital and technology that will keep our brands in position to exceed our customers' expectations." Overall, this was a good quarter for Abercrombie & Fitch, considering the macro challenges highlighted by some retailers that have reported earnings this season.

Abercrombie and Fitch is up 7.3% since the beginning of the year. Investors who bought $1,000 worth of Abercrombie and Fitch's shares 5 years ago would now be looking at an investment worth $4,660.

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