Abercrombie & Fitch (ANF) has strengthened its position in US specialty retail over the past five years and despite a stock pullback due to margin headwinds, its brands are expected to deliver "solid growth" beyond fiscal 2024, UBS Securities said in a Thursday note.
The analysts said they expect Abercrombie's earnings per share to grow at a 10% compound annual growth rate through fiscal 2029.
The market is concerned about the retailer's ability to sustain mid-teens operating margins as it deals with high inventories, clearance activity at the Abercrombie brand, and external factors like weather conditions, according to the note. The investment firm said it expects these pressures to ease in H2 and lead to improved margins.
UBS lowered its fiscal 2025 to 2027 EPS estimates by 6% due to a reduced margin outlook resulting from slower sales growth and cost pressures.
The brokerage maintained a buy rating on the stock while reducing its price target to $150 from $210.
Price: 85.20, Change: -2.03, Percent Change: -2.33
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