Abercrombie & Fitch's Long-Term Margin Expansion Opportunity Impresses This Analyst

Abercrombie & Fitch's Long-Term Margin Expansion Opportunity Impresses This Analyst
  • Telsey Advisory Group analyst Dana Telsey reiterated an Outperform rating on the shares of Abercrombie & Fitch Co ANF and raised the price target from $27 to $33.
  • Yesterday before the market open, ahead of the company's investor meetings at the ICR conference, ANF updated its 4Q22 and FY22 guidance
  • For the quarter, ANF now expects sales to increase 1%-2% Y/Y vs. $1.161 billion in 4Q21, up from a 2-4% YoY decline previously.
  • The updated outlook reflects continued momentum across the Abercrombie & Fitch brand and sequentially improving sales trends at Hollister, the analyst noted.
  • During the quarter, ANF noted that it experienced big surges on Black Friday and Cyber Monday, followed by lulls leading up to Christmas.
  • At the Abercrombie & Fitch brand, women's is expected to deliver its highest fourth quarter sales ever.
  • While Hollister's sales are still expected to decline YoY in 4Q22, trends have improved from last quarter, given assortment adjustments and personnel changes, the analyst said.
  • The analyst said geographically, North America was stronger, APAC had significant COVID flare-ups but the region seems to be returning to normal, and EMEA is still experiencing macro pressures, although a warmer winter to-date has likely benefited the region.
  • Management targets roughly flat YoY inventory growth exiting FY22, allowing the company to be in chase mode for the spring.
  • Telsey sees ANF's report as encouraging, with a top and bottom line raise despite a challenging global macro environment.
  • The analyst continues to see a long-term margin expansion opportunity through a more productive store footprint and expanding digital penetration.
  • Price Action: ANF shares are trading lower by 1.24% at $27.06 on the last check Tuesday.
  • Photo Via Company

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