Abercrombie & Fitch (NYSE: ANF), a specialty retailer selling casual clothing and footwear, is scheduled to report its fiscal second-quarter results on Thursday, August 25. We expect ANF stock to likely see little to no movement due to revenues and earnings just meeting market expectations. The company’s stock has declined 44% so far this year, over a potential recession, inflation, supply chain challenges, and soaring transportation costs. Consumers’ discretionary budgets were shrinking, likely causing them to shift to off-price retail shopping. All of this occurred when the U.S. household savings rate dipped to a low of 5.1% in June’22. However, a typically high gross margin of ~60%, an online sales mix of 48%, and a reduction in the company’s store fleet should help the company offset these short-term pressures to some extent in the upcoming quarter.
Our forecast indicates that ANF’s valuation is around $20 a share, which is fairly priced compared to the current market price. Look at our interactive dashboard analysis on ANF‘s Earnings Preview: What To Expect in Q2? for more details.
(1) Revenues expected to come at par with consensus estimates
Trefis estimates ANF’s Q2 2022 revenues to be around $844 Mil, in line with the consensus estimate. In Q1 2022, ANF managed to grow sales 4% year-over-year (y-o-y) to $813 million, despite difficult comps related to lapping government stimulus and China lockdowns. However, the retailer did see meaningful gross margin compression of more than 800 basis points to 55.3% in Q1, driven by higher freight costs and accelerated sell-through of holiday inventory. It should be noted that Q1 2022 sales were well above Q1 2019 due to the highest average unit retail (AUR) in the Abercrombie brand’s history. While ANF expects its freight and materials costs to remain elevated in the near term, the company is still betting on its growing AUR and fresh momentum in the new line of activewear in the longer term. The company launched its first line of activewear, Your Personal Best, in order to capitalize on the growing, but competitive, activewear market.
2) EPS also likely to be in line with consensus estimates
ANF’s Q2 earnings per share (EPS) is expected to be 22 cents per Trefis analysis, in line with the consensus estimate. The company’s earnings came in at a loss of 32 cents in Q1, compared to 64 cents in the prior-year quarter – largely due to rising costs. Consequently, the company trimmed its FY2022 operating margin outlook down to 5% to 6% from 7% to 8% previously, setting the company up for a significant decline in earnings y-o-y.
(3) Stock price estimate appropriately priced with the current market price
Going by our Abercrombie & Fitch’s Valuation, with an earnings per share (EPS) estimate of around $2.07 and a P/E multiple of 9.8x in fiscal 2022, this translates into a price of $20, which is in line with 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.
With inflation rising and the Fed raising interest rates, Abercrombie & Fitch has fallen 44% this year. Can it drop more? See how low can ANF stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.