Updated Research Report on A&F - Analyst Blog

On Apr 16, 2014, we issued an updated research report on Abercrombie & Fitch Co. ANF following the company's better-than-expected fourth-quarter fiscal 2013 bottom-line results.

This casual apparel retailer posted robust fourth-quarter fiscal 2013 bottom-line results wherein its earnings of $1.34 per share surpassed the Zacks Consensus Estimate of $1.04 per share. Better-than-expected results were primarily due to a lower tax rate that gained as the major chunk of earnings were derived from across national borders as well as higher expense savings stemming from the ongoing profit improvement initiatives.

We are impressed with Abercrombie's second consecutive quarter of upbeat bottom-line performance.  With a surprising turnaround driven by its focus on executing long-term strategic plans, the company provided an impressive guidance for fiscal 2014.

The company now expects significant improvement in its business in 2014 and beyond. Therefore, it projects fiscal 2014 earnings in the range of $2.15–$2.35 per share, implying year-over-year growth of 12%–23%. Currently, the Zacks Consensus Estimate is pegged at $2.37 per share, which lies above the company's higher-end guidance range.

Furthermore, we believe that management's sustained focus on expanding global operations and improving cash flows, while maintaining a healthy balance sheet, bode well for the future.

However, the company's comparable-store sales (comps), which shows disappointing results for the past eight quarters, prevents us from becoming more constructive on the stock.

Abercrombie currently carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Some better-ranked stocks in the apparel/shoe retail space include American Apparel Inc. APP, Foot Locker Inc. FL and Bebe Stores Inc. BEBE. All of these have a Zacks Rank #2 (Buy).