Abercrombie & Fitch (NYSE: ANF), a specialty retailer focusing on casual clothing and footwear, is set to unveil its fiscal Q2 2024 results on Wednesday, August 28. The stock has experienced tremendous growth this year, soaring from $88 to $165, outpacing the broader market significantly. Its direct competitor, American Eagle Outfitters (NYSE: AEO), has lagged behind with only a 6% increase in the same period.
Positive Earnings Trends
The company’s earnings in FY’23 exceeded expectations, showing substantial growth from the previous year. ANF’s operating margin also expanded notably. The strong performance was driven by impressive results from its key brands, especially Hollister. The beginning of FY’24 also demonstrated robust financials, outperforming initial forecasts.
Despite its impressive run, ANF’s current valuation at a P/E ratio of 21x appears elevated, potentially challenging to maintain given the rapid growth. The apparel sector’s sensitivity to economic conditions adds a layer of uncertainty to the stock’s future performance.
ANF’s stock has shown remarkable gains, rising 725% since early 2021, surpassing the S&P 500’s growth. However, the journey has been rocky with fluctuations in returns, indicating the stock’s volatility compared to the market index.
Stock Performance Comparison
Outperforming the S&P 500 consistently has been a challenge for many stocks in recent years, including ANF. The Trefis High Quality Portfolio has shown greater stability and superior returns, highlighting the difficulty of beating the market in both favorable and adverse conditions.
Looking ahead, uncertainties in the macroeconomic environment, such as high oil prices and interest rates, raise questions about ANF’s ability to maintain its growth trajectory compared to the broader market.
Analysts suggest that ANF’s current valuation aligns with its market price. The company’s estimated EPS and P/E multiple for fiscal 2024 indicate a fair market price around $156, in line with the current valuation.
Revenue and Earnings Performance
In Q2 2024, ANF’s revenue is expected to slightly surpass consensus estimates, continuing its strong sales growth trend from the previous quarter. The company’s impressive performance across its brands, especially with Hollister, paints a positive picture for its revenue stream.
Similarly, ANF’s expected EPS for Q2 2024 appears marginally lower than consensus estimates but reflects a robust bottom-line growth compared to the previous year. Factors such as gross profit rate expansion and operating margin growth contribute to the optimistic earnings outlook.
Conclusion and Market Comparison
Overall, Abercrombie & Fitch’s performance in Q2 2024 showcases continued momentum in revenue and earnings. The stock’s valuation remains in line with market expectations, suggesting a fair price level. Comparisons with peers indicate ANF’s competitive positioning within the industry.
| Returns | Aug 2024 MTD | 2024 YTD | 2017-24 Total |
| ANF Return | 12% | 87% | 1275% |
| S&P 500 Return | 2% | 18% | 152% |
| Trefis Reinforced Value Portfolio | 4% | 12% | 728% |
[1] Returns as of 8/27/2024
[2] Cumulative total returns since the end of 2016