Abercrombie & Fitch Co. ANF has provided a positive business update, thanks to a robust performance during the holiday season. The company witnessed record fourth quarter-to-date net sales, ahead of management’s expectations issued in November.
Net sales growth was driven by comparable sales (comps) across regions and brands during the holiday selling period. This is backed by the continued positive response to its exciting product assortments and engaging marketing.
Driven by a stellar holiday performance, management hiked the sales view for the fourth quarter and fiscal 2024 while reiterating the outlook for the other metrics.
A Glimpse of ANF’s Latest Update
Looking ahead, Abercrombie anticipates sustainable, profitable sales growth as it exits fiscal 2024. Moreover, it notes that the raised fiscal 2024 view reflects a significant outperformance of its financial targets under the Always Forward Plan 2025.
Robust customer-driven brands, relevant brand playbooks, major global growth opportunities leveraging capabilities in owned and operated channels and a solid omnichannel base, coupled with a healthy balance sheet and consistent free cash flow, are likely to boost growth.
Management expects fiscal fourth-quarter net sales growth to be in the band of 7-8%, an uptick from the previously mentioned 5-7% bracket. The operating margin for the fiscal fourth quarter is still projected to be around 16%. This guidance does not include the impact of 550-basis points from the 53rd week and about 50-basis points of foreign currency. The company retained its operating margin view of about 16% and effective tax rate guidance in the high 20s for the fourth quarter of fiscal 2024.
For fiscal 2024, Abercrombie anticipates net sales growth of 15% compared with the previously mentioned guidance of 14-15%. Management continues to expect an operating margin of 15% and an effective tax rate in the mid-20s in fiscal 2024. The sales outlook excludes the impact of 120 basis points from the 53rd week.
What’s More?
Despite a robust view and holiday period, shares of the company fell nearly 16% yesterday. Although ANF has raised its sales guidance, the same falls short year over year. The company registered 21% sales growth in the fourth quarter and 16% in fiscal 2024. This might have hurt investors’ sentiments.
Abercrombie has been experiencing strong sales growth across each of its brands. The company has been seeing customers responding to its product and experiencing growth across regions and brands. Management has been making investments in the Abercrombie digital experience as well. The Hollister team remains committed to expanding its reach within the teen market.
Abercrombie is working toward rationalizing its store base by reducing its dependence on underperforming tourist-driven locations. As part of its store-optimization plans, the company plans to reposition larger format flagship locations to smaller omnichannel enabled stores.
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In a nutshell, management is focused on creating a trend-right merchandise assortment, deepening relations with customers via marketing, enhancing the digital commerce agenda and efficiently controlling expenses. Such strengths might continue driving ANF’s results ahead. Over the past year, shares of this Zacks Rank #1 (Strong Buy) company have surged 40.2% compared with the industry’s 38.8% growth.
Other Key Picks
We have highlighted three better-ranked stocks, namely Deckers DECK, Boot Barn BOOT and Urban Outfitters URBN.
Deckers, a footwear and accessories dealer, currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 13.6% from the year-ago figure. DECK delivered an average earnings surprise of 41.1% in the trailing four quarters.
Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of 6.8%, on average.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 13.4% from the year-ago figure.
Urban Outfitters, a fashion lifestyle specialty retailer, currently sports a Zacks Rank of 1. URBN delivered an average earnings surprise of 22.8% in the trailing four quarters.
The consensus estimate for Urban Outfitters’ current financial-year sales indicates growth of 6.6% from the year-ago figure.
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