Abercrombie & Fitch (NYSE: $ANF) is a leading American retailer founded in 1892 that specializes in casual luxury apparel and accessories known for its preppy aesthetic and polarizing marketing campaigns. It operates retail stores worldwide and maintains a strong online presence.
On Wednesday, March 6, 2024, the company announced its Q4 and full fiscal year 2023 financial results, showcasing impressive results that surpassed projections.
Abercrombie & Fitch Q4 Financial Results
The company reported a 21% Y/Y net sales growth in Q4, totaling $1.5 billion, fueled by robust performance across regions and brands, with the Abercrombie brands leading the charge with a staggering 35% net sales growth and Hollister brands contributing a 9% increase.
Gross profit margins climbed to 62.9%, a substantial 720 basis point improvement over the prior year. Operating expenses rose by 19%, driven by higher incentive compensation, marketing, inflation, the 53rd reporting week, and digital and technology investments. Its Operating Expense Ratio fell from 48.3% to 47.6%.
Its strong performance translated into robust profitability, with operating income reaching $223 million, surpassing last year’s figures of $87 million (reported) and $92 million (adjusted non-GAAP). Net income per diluted share soared to $2.97, surpassing the previous year’s reported earnings of $0.75 and adjusted non-GAAP figures of $0.81.
Fiscal 2023: A Year of Remarkable Growth
For the full year ended February 3, 2024, Abercrombie & Fitch reported net sales of $4.3B, a 16% increase compared to the previous year. The additional week in fiscal 2023 contributed approximately $50 million, or 140 basis points, to the full-year net sales.
Comparable sales for the year rose by an impressive 13%, while the gross profit rate reached 62.9%, up approximately 600 basis points year over year. The rise was mainly due to a 340 basis point increase in average unit retail and a 300 basis point improvement from lower freight costs and higher raw materials. However, it was partially offset by a 30 basis point adverse impact from exchange rates.
The Operating expenses ratio fell from 54.5% to 51.7%, despite a 10% increase in absolute terms due to incentive compensation, inflation, marketing, the 53rd week, and digital and technology expenses.
Operating income soared to $485 million (reported), up by 421.51%, and $489 million (adjusted non-GAAP), a 357.01% increase from last year. Diluted earnings per share surged to $6.22 (reported) and $6.28 (adjusted), a substantial rise from the 2022 figures of $0.05 (reported) and $0.25 (adjusted).
Robust Balance Sheet and Shareholder Value Creation
Abercrombie & Fitch ended fiscal 2023 with a healthy balance sheet. As of February 3, 2024, the company held $901 million in cash and equivalents, a notable increase from the previous year’s $518 million. The company’s inventories also decreased by 7% Y/Y to $469 million.
To enhance shareholder value, the company spent $78 million to purchase $77 million at par value of its outstanding senior secured notes during the full year ended February 3, 2024.
Abercrombie & Fitch (ANF) Stock Performance
Abercrombie & Fitch (ANF) stock is currently trading at $135.80, reflecting a 2.97% dip from its previous close of $139.95. Notably, in premarket trading, ANF showed a positive trend with a 2.57% increase, reaching $143.54.
During the late afternoon trading session on Wednesday, March 6, 2024, the stock was down 4.45% from its previous close, trading at $133.72 per share.
With a market capitalization of $6.855 billion, ANF’s 24-hours trading range is $130.69 – $139.89. Over the past 52 weeks, the stock’s price has risen by 405.60%, hitting a high of $140.28 and a low of $21.74.
The 50-day moving average is $106.97, while the 200-day moving average is $65.33, with an average trading volume of 1.66 million shares over the last 10 days and a forward P/E ratio of 22.47.
Promising 2024 Outlook
Abercrombie & Fitch provided an optimistic outlook for Q1 of fiscal 2024. The company forecasted net sales growth in the low double-digit percentage compared to the previous year’s first quarter of $836 million. Operating margins will range from 8% to 10%, up from the adjusted 4.6% in Q1 2023. The effective tax rate is anticipated to be around 10%, lower than the company’s statutory federal income tax rate.
For the full fiscal year 2024, the company projects net sales growth from 4% to 6% from the $4.3 billion reported in fiscal 2023. The company also expects the Y/Y growth rate to be higher in the year’s first half, partially due to the calendar shifts from the 53rd week in 2023.
Operating margins are expected to be around 12%, up from the 11.4% recorded in 2023. Effective tax rates are projected to fall within the mid-to-upper 20s range, depending on jurisdiction and income level. Capital expenditures are forecasted to be approximately $170 million.
Is ANF Stock a Buy?
Abercrombie & Fitch Co.’s stellar performance in the fourth quarter and full fiscal year 2023 has undoubtedly solidified its position as a formidable player in the apparel retail industry. The company appears poised for continued success with robust sales growth, impressive profitability, and a promising outlook for the upcoming year.
Based on the company’s exceptional financial results, positive analyst sentiments, and bullish growth projections, the recommendation for ANF stocks is “Buy.” Investors seeking exposure to the thriving apparel retail sector should strongly consider adding this company to their portfolios, as it continues to demonstrate it can navigate headwinds and deliver consistent growth.
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