Abercrombie & Fitch Co. (ANF) Last Update 9/19/22
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Abercrombie & Fitch Co.
Hollister Stores
Trefis Price
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Potential upside & downside to trefis price

Abercrombie & Fitch Co. Company


  1. Hollister Stores constitute 35% of the Trefis price estimate for Abercrombie & Fitch Co.'s stock.
  2. Abercrombie & Fitch Stores constitute 21% of the Trefis price estimate for Abercrombie & Fitch Co.'s stock.


  1. ANF Saw A Weak Q2
The teen basics retailer's second-quarter revenue declined 7% year over year to $805 million and missed analysts' expectations by $38 million. It posted an adjusted net loss of $15 million, compared to an adjusted net profit of $109 million a year ago, as its adjusted net loss of $0.30 per share broadly missed the consensus forecast by $0.53. ANF's brief post-pandemic recovery hit a brick wall in the first half of fiscal 2022 as Abercrombie's growth cooled off and Hollister's growth stalled out. The company mainly blamed that slowdown on inflation, which throttled consumer spending on new clothes and other discretionary products.

Note: ANF's FY'21 ended on January 29, 2022. Q1 FY'22 refers to the quarter that ended on April 30, 2022.

  1. Guidance
ANF expects the slowdown to continue in the second half of the year. It expects its sales to decline by high single digits in the third quarter, and to drop by mid single digits for the full year. That represents a big reduction from its prior forecast for 0%-2% growth for the full year. It also expects margins to decline as it keeps inventory levels under control with lower prices and markdowns.


  1. Hollister Stores' Revenue per Square Foot
Hollister Stores' Revenue per Square Foot: Hollister stores' revenue per square foot increased from $525 in 2017 to $558 in 2019, as a fair portion of consumer spending was on basic apparel. This figure dipped to $520 in 2020 due to the onset of the pandemic before growing back to $610 in 2021. Going forward, we expect Hollister stores to continue their expansion, and reach $700 in the long term, thanks to its updated product portfolio. The retailer's efforts to turn around its product portfolio should help it attract customers in the long run.

  1. Hollister Stores' EBITDA Margin
Hollister Stores' EBITDA Margin: Hollister Stores' EBITDA Margins declined drastically from 14.4% in 2012 to 7.1% in 2019, driven by excessive promotional activities undertaken by the company. This figure further declined to 5.3% in 2020. However, it was able to get the figure back to 13.9% in 2021. If Hollister can reduce the pressure on margins, such that it reaches 17% by the end of the forecast period, there could be a 10% upside to our price estimate.


Abercrombie & Fitch is a specialty retailer that operates stores and websites selling casual sportswear apparel, including knitted and woven shirts, graphic t-shirts, fleece, jeans and woven pants, shorts, sweaters, outerwear, personal care products, and accessories for men, women, and kids under the Abercrombie & Fitch, Abercrombie kids, and Hollister brands.


Higher number of Hollister stores than Abercrombie & Fitch stores

Abercrombie & Fitch operates about 224 namesake stores globally, while it has roughly 505 Hollister stores (as of 2021), which are comparatively smaller in size. In the past, Abercrombie & Fitch stores generated better revenue per square foot as compared to Hollister, because it is a relatively expensive brand. This trend reversed in 2017. Consequently, having a significantly higher store count and a better revenue per square foot, Hollister contributes a higher value to the company.

Rapidly growing direct to consumer business

Internet revenues have increased substantially for the company in recent years, forming nearly one-third of the company's sales. The aggressive growth is expected to continue going ahead. With the anticipated growth in online apparel sales in the U.S., Abercrombie's plans to take advantage of this growing segment, and the development of e-commerce channels and an omnichannel portfolio remains a high priority for the company.


Consolidation of Abercrombie & Fitch stores in the U.S.

Abercrombie & Fitch is looking to reduce its U.S. store fleet to an optimal size, as it takes significant strides towards the development of an omnichannel platform. Also, with its top line under pressure, the company is relying on this strategy to defend its bottom-line growth. Abercrombie & Fitch has closed significantly more stores in the U.S. over the past three years than it has opened.

Scope For International Growth

While Abercrombie & Fitch has been focusing on right-sizing its store footprint in North America, it is dependent on the international markets for growth through expansion. In Europe, the company sees a $1 billion opportunity across all channels. At present, the company has a modest 127 stores in the region. Consequently, its focus in the region is on increasing penetration, shifting to smaller, more productive stores, and building a more local customer base. The company's partnership with wholesalers, like ASOS, NEXT, and Zalando, should ensure online sales growth. In China, the company estimates a $500 million opportunity. The company currently has only 30 stores in the country and is focusing on growing its digital business, through its partnership with Alibaba, as well as its store count, to address this opportunity.