VALUATION HIGHLIGHTS

1. Hollister Stores constitute 51% of the Trefis price estimate for Abercrombie & Fitch Co.'s stock.
2. Abercrombie & Fitch Stores constitute 49% of the Trefis price estimate for Abercrombie & Fitch Co.'s stock.

WHAT HAS CHANGED?

1. ANF Q3 2025 Snapshot

In Q3 2025, Abercrombie delivered record net sales of US$1.30 billion, up about 7% year-over-year, marking its 12th consecutive quarter of growth. On the bottom line, earnings per diluted share came in at US$2.36, beating the company’s outlook and surpassing consensus estimates. The standout driver of growth was the Hollister brand, which saw a 16% increase in sales, while the legacy Abercrombie brand experienced a 2% decline — underscoring a material shift in where the company’s strength lies. On a geographic basis, sales rose 7% in both the Americas and EMEA, though they slipped 6% in APAC.

Profitability showed mixed signals: operating income was US$155 million, with an operating margin of 12.0%, down from 14.8% a year ago — in part because of tariff-related headwinds and higher costs. Still, the company continued returning capital to shareholders, repurchasing US$100 million in stock during the quarter (US$350 million year-to-date, roughly 9% of outstanding shares at the beginning of 2025).

Note: ANF's FY'24 ended on February 1, 2025.

2. Guidance

For the full fiscal 2025, the company now expects net sales growth of 6–7% (versus previous 5–7%), with a GAAP operating margin of 13.0–13.5%, and diluted EPS of roughly US$10.20–10.50. They plan capital expenditures of US$225 million, about US$450 million in share repurchases, and are targeting around 48 million diluted weighted-average shares (reflecting buybacks).

Looking ahead to Q4, management projects net sales growth of 4–6%, operating margin near 14%, and EPS of about US$3.40–3.70 — assuming roughly US$100 million in share repurchases in the quarter and 47 million shares outstanding.

3. Tariff Uncertainties

Abercrombie sourced about 30% of its products from China before the pandemic, but that number is now in the low single digits. Its biggest trading partners are now Vietnam, Cambodia and India, which all face tariffs between 26% and 49% under President Donald Trump’s April proposal. The company reiterated during a conference call with analysts that it is not planning broad price increases, saying higher prices are not part of its outlook.

4. NFL Partnership

The company announced it would be NFL’s first “official fashion partner” – a multiyear deal that will include personal styling for athletes, athlete-led campaigns and player-designed apparel. The partnership comes after Abercrombie launched an assortment of NFL-licensed products in 2022, a category that has performed well for the company.

It has teamed up with star players like Christian McCaffrey, Tee Higgins and CeeDee Lamb to advertise the partnership and designed limited-edition co-designed apparel that will be available for sale during the upcoming season.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

1. Hollister Stores' Revenue per Square Foot

Hollister Revenue per Sq Ft : Hollister stores' revenue per square foot grew from $548 in 2022 to $692 in 2024. Going forward, we expect Hollister stores to continue their expansion, and reach $811 in the long term, thanks to their updated product portfolio. The retailer's efforts to turn around its product portfolio should help it attract customers in the long run.

2. ANF EBITDA Margin

EBITDA Margin: ANF's EBITDA Margins grew from 6.9% in 2022 to 18.7% in 2024, driven by revenue and comparable sales growth in the Americas, EMEA, and APAC segments. We expect this metric to reach 18% by the end of our forecast period. If ANF can reduce the pressure on margins, such that it reaches 20% by the end of the forecast period, there could be a 15% upside to our price estimate.

BUSINESS SUMMARY

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.

SOURCES OF VALUE

Higher number of Hollister stores than Abercrombie & Fitch stores

Abercrombie & Fitch operates approximately 278 stores globally under its own brand, while Hollister has around 511 locations as of 2024, with Hollister stores generally being smaller in size. Historically, Abercrombie & Fitch stores generated higher revenue per square foot due to their positioning as a premium brand. However, this trend shifted in 2017 and 2018. Since 2019, Abercrombie & Fitch has experienced a significant increase in revenue per square foot compared to Hollister. Despite Hollister's larger store count, Abercrombie consistently outperforms in revenue per square foot.

Rapidly growing digital operations

To enhance the customer experience and ensure consistency across channels, the company continues to invest in its digital infrastructure, including upgrading its merchandising enterprise resource planning (ERP) system. It ships to over 108 countries, processes transactions in 21 currencies, and accepts 20 payment methods globally. The Company operates desktop and mobile websites in multiple languages, along with two mobile apps that enhance shopping and provide customer insights. With mobile traffic accounting for over 87% of its digital visits in Fiscal 2024, the company further strengthened its mobile capabilities. Additionally, it partners with third-party e-commerce platforms to expand its global reach.

KEY TRENDS

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 Middle East, and Africa, the company has a modest 133 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. The company currently has only 56 stores in the Asia Pacific region and is focusing on growing its digital business, through its partnership with Alibaba, as well as its store count, to address this opportunity.