Abercrombie & Fitch (NYSE: $ANF) released its second quarter earnings on Wednesday, after markets closed, beating analysts’ expectations. Despite the earnings and revenue beat, the stock was down nearly 10% in pre-market trading. Let’s explore what ANF stock was trending downward.
Abercrombie & Fitch Q2 Earnings
The clothing company reported an EPS of $2.50, beating estimates of $2.19, while revenue was $1.13 billion, beating estimates of $1.1 billion, a 21% YoY increase. The company reported an 18% YoY increase in comparable sales.
Abercrombie brands grew 26% while the Hollister brands reported a 17% YoY increase. Its gross profit margin grew 240 basis points to 64.9%.
Upbeat Outlook
For fiscal 2024, Abercrombie now forecasts sales will increase 12% to 13%, up from their previous forecast of 10% growth. Additionally, it expects a full-year operating margin guidance of 14% to 15%.
For the third quarter, the apparel retailer is expected a low-double-digit growth in net sales compared to last year, and revenue of $935 million.
Great Comeback Story
Over the past few years, Abercrombie has pulled off one of the most successful comebacks after falling in the 2000s after it success in the 90s. One of the reason for its fall was aggressive international expansion, which turned out to be too expensive.
ANF Stock Performance
Year to data, Abercrombie stock is up 83.17% to $166.61, and in the past 12 months, it has gained 236.52%. The recent dip during pre-market trading likely part of a normal market correction. Looking at its valuation, it is fairly priced, with a trailing P/E ratio of 20.72, which is in line to industry peer’s TJX (TJX) of 29.07.
Analysts remain up beat about its future, giving it a moderate buy rating. They forecast a wide range for the stock with a high of $215.00, and a low of $149.00. Their average forecast of $186.29 is a (11.81% upside based on Tuesday’s closing price.
Should You Add Abercrombie & Fitch To Your Portfolio In 2024?
Abercrombie and Fitch has reinvented themselves, including launching new lines with less-revealing logos, and less-revealing apparel. It is finding growth amongst millennials, and growing outside its traditional markets.
Its valuation, while not cheap, is fair, and its outlook is promising. Based on its financial results, forecast, and new growth markets, adding Abercrombie to your portfolio could potentially pay off in the long run.
However, investors must be aware of potential risks. For instance, Bangladesh is currently undergoing a period of intensified unrest, which could have a major impact on the global clothing sector. The country is a major manufacturing hub from most of the world’s hub, and any disruptions could seriously impact global supply chains. On the plus side, the Fed is likely to cut rates in September, which could boost consumer confident.
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