What To Expect From ANF’s Stock Post Q4?

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ANF: Abercrombie & Fitch logo
ANF
Abercrombie & Fitch

Abercrombie & Fitch (NYSE: ANF), a specialty retailer selling casual clothing and footwear, is scheduled to report its fiscal fourth-quarter results on Wednesday, March 2. We expect ANF stock to likely trade higher due to revenues and earnings beating market expectations. The consumer discretionary stocks have been recovering well in the first three-quarters 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. That said, the growing digital business (that accounts for 46% of the top-line), revamped stores, and lean inventory discipline should likely help the revenue growth in the fourth quarter. For the full year, ANF expects sales to grow in the range of 19% to 20% compared to 2020 and up 2% to 3% compared to 2019 – as mentioned in a recent update. Further, an operating margin of 9% to 10% is also anticipated, in line with the prior outlook.

Our forecast indicates that ANF’s valuation is around $48 a share, which is around 24% higher than the current market price. Look at our interactive dashboard analysis on ANF‘s Earnings Preview: What To Expect in Q4? for more details.

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(1) Revenues expected to be above the consensus estimates

Trefis estimates ANF’s Q4 revenues to be around $1.2 Bil, 5% above the consensus estimate. Abercrombie & Fitch’s third-quarter 2021 sales came in at $905 million, up 10% year-over-year (y-o-y) and 5% compared to Q3 2019. All this suggests that the company’s brands are still resonating with consumers. In addition, the retailer’s digital sales rose 8% y-o-y and now make up 46% of the company’s top line. For Q4, ANF anticipates sales to be up in the range of 4% to 6% compared to 2020 and down 2% compared to Q4 2019. The prior outlook of up 3% to 5% to 2019 is believed to be impacted by additional unexpected inventory receipt delays and increased Covid-related impacts. For full-year 2021, we expect ANF’s Revenues to grow 24% y-o-y to $3.9 billion.

2) EPS also likely to be above consensus estimates

ANF’s Q4 earnings per share (EPS) is expected to be $1.36 per Trefis analysis, 7% above the consensus estimate. In Q3, production and delivery delays and elevated costs led to a 300-basis-point headwind to the gross profit margin. However, the retailer was able to largely offset that hit with higher pricing, pointing to an expansion of operating margin by a large 800 basis points y-o-y in Q3. Consequently, the company posted adjusted earnings of $0.86 per share, up from $0.71 per share in the third quarter of 2020 and $0.37 per share the year before that. Going forward, the company expects the rising costs to likely linger through the fourth quarter as well.

(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 $4.75 and a P/E multiple of 10.2x in fiscal 2021, this translates into a price of $48, which is almost 24% higher than the current market price.

It is helpful to see how its peers stack up. ANF Peers shows how Abercrombie & Fitch compares against its peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

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.

Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 ANF Return 0% 9% 217%
 S&P 500 Return 0% -8% 96%
 Trefis MS Portfolio Return 0% -10% 254%

[1] Month-to-date and year-to-date as of 3/1/2022
[2] Cumulative total returns since the end of 2016

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