Goldman Adds Abercrombie & Fitch To Conviction-Buy List

Goldman sees major upside to consensus for Abercrombie & Fitch

, as a breakdown of estimates between domestic and international suggests only modest comp growth and <30bps of domestic gross margin upside is assumed for both. This is well below the gains we saw in the mid-2000s. Goldman raises its 2010-12 EPS for ANF by an average of 22% and stand 26% above 2011 consensus. Goldman's higher conviction in ANF reflects more room for multiple expansion thanks to undervalued, double digit Global growth. ANF/AEO focus on a classic casual aesthetic. They thrive during teen trend cycles that favor preppy/casual looks, but struggle during periods of more eclectic/dressy fashion. After 3.5 yrs where edgier trends like dresses and skinny jeans hurt ANF, Goldman sees early signs that the cycle may move back in their favor. These include buzz of a major trend shift from fashion-forward retailers like URBN, signs that the dress category is losing momentum, and improvement in the women's side of ANF's business, which is more impacted by fashion shifts than men's. ANF is trading higher at $56.90