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Abercrombie’s (ANF) Estimates on the Rise: Optimism Intact

Zacks

Apparel retailer, Abercrombie & Fitch Company ANF has been putting up a good show of late with respect to upsurge in stock price as well as positive estimate revisions. The company’s strategic capital investments, cost saving efforts along with loyalty and marketing programs are primarily behind this feat. Driven by these attributes, the company is on track to return to growth and profitability.

Superb Stock Performance

Shares of Abercrombie have climbed a whopping 47.2% in the last three months, outperforming the industry’s upside of just 5.9%. Additionally, the stock has witnessed a solid growth of 41.5% after reporting better-than-expected results on Aug 24.



The company’s second-quarter fiscal 2017 results marked a return to earnings beat trend. Additionally, this was the company’s first positive bottom-line surprise in the last six quarters, following in-line results in first-quarter fiscal 2017. Moreover, revenues beat estimates for the second straight quarter.

Positive Estimate Revisions Indicate Continued Optimism

Following the upbeat quarter, the company provided an encouraging view for fiscal 2017 and the fiscal second-half, which led to an uptrend in estimates. Further, we note that the upward estimate revision trend continues even almost two months after the results.

The Zacks Consensus Estimate has witnessed an uptrend in the last 30 days. Notably, the loss estimate of 1 cent per share for fiscal 2017 was narrowed from a loss prediction of 6 cents per share. Moreover, the estimate for fiscal 2018 of 1 cent per share was revised from the previous estimate of a loss of 1 cent per share.

Abercrombie & Fitch Company Price, Consensus and EPS Surprise


Abercrombie & Fitch Company Price, Consensus and EPS Surprise | Abercrombie & Fitch Company Quote

Apart from a strong second quarter, the company is gaining from a significant progress on strategic initiatives and strength in Hollister as well as direct-to-customer business, amid a highly promotional retail backdrop. Moreover, the minimal impact from currency headwinds in recent quarters has been a tailwind. So, here is a sneak peek into the company’s initiatives that are driving growth.

Abercrombie on Track to Revive Iconic Brands

Abercrombie remains focused on reviving its brands, enhancing performance and returning to profitable growth. Consequently, the company has been implementing several steps to spur on business forward. These initiatives include improving leadership team and organizational structure; optimizing store fleet by introducing stores in high-performing markets, while closing the underperforming ones; remodeling stores and improving assortments to meet changing trends and demands; developing omni-channel capacities and focusing on key merchandise and design processes.

We believe that the company is very much on track to bring a turnaround as management anticipates these efforts to revive its iconic brands along with driving notable and sustained growth.

Expanding International Operations to Boost Profitability

In the face of economic challenges, when teenagers have become less active shoppers, Abercrombie has put in effort to stay in the business by expanding international operations. To this end, the company has is on track to expand its franchise in the Middle East with its partner — Majid Al Futtaim. Recently, the company announced plans to open its first namesake store in Jeddah, Saudi Arabia in September. Additionally, Majid Al Futtaim plans to open five more flagship and three abercrombie kids stores in the Middle East region. Apart from the Middle East, the company is targeting expansion in China, evident from the opening a store in Alibaba Group’s Tmall in July 2017. We believe the company’s foray in to foreign lands is likely to enhance profitability in the long run.

Bottom Line

Though this may seem to be just the beginning of a new chapter for Abercrombie, we hope this momentum to continue. While the company’s namesake brand and strained margins remain a concern, the aforementioned strategic initiatives and other measures clearly position it for an impending growth ahead. Aptly, Abercrombie currently sports a Zacks Rank #1 (Strong Buy).

Want More of Retail? Buy these Trending Stocks

Some other top-ranked stocks in the retail space include DSW Inc. DSW, Zumiez Inc. ZUMZ and Tilly’s Inc. TLYS, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

DSW has a long-term EPS growth rate of 6.3%. Further, the stock has returned 22.1% in three months.

Zumiez has gained a whopping 46.5% in three months. Moreover, it has a long-term earnings growth rate of 18%.

Tilly’s has improved 24.1% in three months. Further, the company has delivered an average positive earnings surprise of 83.7% in the trailing four quarters.

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