Abercrombie & Fitch Stock Update

Shares in Abercrombie & Fitch Company (NYSE:ANF) rose over 3% on Monday following Citi analysts' announcement of a 30-day positive catalyst watch ahead of the earnings report on November 26.

Citi predicts a strong earnings per share (EPS) beat against consensus, boosted by double-digit comparable sales (comp) growth at both Abercrombie & Fitch (A&F) and Hollister brands.

Interestingly, Hollister is expected to outperform A&F in comps for the first time in years, presenting significant upside for the second half of fiscal year 2024 and fiscal year 2025 consensus EPS.

According to analysts led by Paul Lejuez, “While the magnitude of A&F’s 3Q comp deceleration matters, we believe A&F brand momentum remains solid, driven by strong execution/on-trend product.”
They have maintained their third-quarter EPS estimate at $2.51, compared to the consensus of $2.36.

Adjustments have also been made to comp estimates: A&F’s was lowered from +15% to +12%, against a consensus of +14%, while Hollister’s was raised from +12% to +15%, above the consensus of +10%.

Citi has revised its fiscal year 2024 and 2025 EPS estimates from $10.64 and $12.08 to $10.73 and $12.34, respectively, owing to stronger Hollister comps.

The bank maintained its price target of $190.

For the fourth quarter, analysts expect Abercrombie to guide sales to mid-single digits (MSD), accounting for the last year’s additional week, implying underlying comp growth of low double digits (LDD).

Gross margin is projected to remain flat, with a modest EBIT margin deleverage, leading to an EPS guidance of approximately $3.30, slightly below consensus of $3.40.

In addition to the guidance, three other factors were highlighted for monitoring: A&F's expected comparable sales deceleration compared to the second quarter, ongoing strength in Hollister's performance, and anticipated ramp-up of share repurchases.