[Updated: 12/02/21] ANF Stock Update
Abercrombie & Fitch (NYSE: ANF) recently reported its Q3 report, wherein revenues and earnings both were above our estimates. The company surpassed expectations on the top and bottom lines in its Q3 earnings with reported revenues of $905 million, up 10% year-over-year (y-o-y), and EPS of 77 cents, up 17% y-o-y. It should be noted that the company’s revenues still grew 5% compared to the pre-pandemic quarter, suggesting that the retailer’s brands continue to resonate with the customers. To add to this, ANF’s digital sales also rose 8% y-o-y to make up 46% of the company’s top line at present.
Despite a solid performance, ANF’s stock has been down almost 25% since the announcement of Q3 results due to the comments on supply chain issues. The production and delivery delays have resulted in a 300 basis point headwind to the gross profit margin in Q3. Although the retailer was able to substantially offset this with higher pricing, supply chain bottlenecks are expected to remain through at least the fourth quarter, if not longer.
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We have updated our model following the Q3 release. We now forecast ANF’s Revenues to be $3.9 billion for the full year 2021, up 21% y-o-y. Looking at the bottom line, we now forecast EPS to come in at $4.75, compared to our earlier estimate of $4.56. Given the changes to our revenues and earnings forecast, we have revised our ANF’s Valuation at $48 per share, based on $4.75 expected EPS and a 10.2x P/E multiple for fiscal 2021 – almost 35% higher than the current market price. We believe that the company’s stock appears cheap at the current levels.
[Updated: 11/22/21] ANF Q3 Pre-Earnings
Abercrombie & Fitch (NYSE: ANF), a specialty retailer selling casual clothing and footwear, is scheduled to report its fiscal third-quarter results on Tuesday, November 23. We expect ANF stock to likely trade higher due to revenues coming in line and earnings beating expectations. The consumer discretionary stocks have been recovering well in the fiscal first half 0f 2021 on the back of increased vaccination rates in the U.S. The pandemic accelerated the e-commerce shift for ANF, which was more cost-efficient for the company. Our forecast indicates that ANF’s valuation is around $48 a share, which is around 6% higher than the current market price. Look at our interactive dashboard analysis on ANF‘s Pre-Earnings: What To Expect in Q3? for more details.
(1) Revenues expected to be in line with consensus estimates
Trefis estimates ANF’s Q3 revenues to be around $898 Mil, in line with the $897 Mil consensus estimate. The company’s revenues grew a strong 24% year-over-year (y-o-y) to $865 million in Q2, driven by an easy comparison to last year and also aided by a strong start to the U.S. back-to-school season, solid response to the Gilly Hicks brand relaunch, and updated store experiences. That said, the company’s revenue was 3% above pre-pandemic levels from Q2 2019. The core U.S. market had healthy net sales growth of 11% on a two-year basis.
2) EPS likely to be slightly above consensus estimates
ANF’s Q3 earnings per share (EPS) is expected to be $0.69 per Trefis analysis, marginally above the consensus estimate of $0.66. ANF’s gross margin came in at 65.2% in Q2, up 590 basis points from the second quarter of 2019 – benefiting from double-digit AUR (average unit retail) improvement. This, combined with ongoing expense management, led to an expansion of operating margin by a large 1800 basis points on a two-year basis. Consequently, the company’s adjusted earnings per share came in at $1.70 compared to $0.23 in Q2 2020, and a loss of $0.48 in the pre-pandemic quarter. It should be noted that the current quarter benefited from about $0.53 related to some one-time tax items.
(3) Stock price estimate higher than the current market price
Going by our Abercrombie & Fitch’s Valuation, with an earnings per share (EPS) estimate of around $4.56 and a P/E multiple of 10.5x in fiscal 2021, this translates into a price of $48, which is almost 6% higher than the current market price.
It is helpful to see how peers stack up. ANF Stock Comparison With Peers for how Abercrombie & Fitch compares against peers on metrics that matter.
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.
|S&P 500 Return||0%||23%||106%|
|Trefis MS Portfolio Return||0%||44%||292%|
 Month-to-date and year-to-date as of 12/2/2021
 Cumulative total returns since 2017