Abercrombie & Fitch Co. ANF is scheduled to report fourth-quarter fiscal 2024 results on March 5, before the opening bell.

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The Zacks Consensus Estimate for ANF’s fiscal fourth-quarter revenues is pegged at $1.56 billion, suggesting 7.6% growth from that reported in the year-ago quarter. For fiscal fourth-quarter earnings, the consensus mark is pegged at $3.49 per share, implying a 17.5% increase from the $2.97 reported in the year-ago quarter. The consensus estimate for earnings has edged down by a penny in the past seven days.

In the last reported quarter, Abercrombie's earnings beat the consensus estimate by 7.8%. Moreover, ANF has delivered an earnings surprise of 14.8%, on average, in the trailing four quarters.

Earnings Whispers for ANF

Our proven model conclusively predicts an earnings beat for Abercrombie this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Abercrombie currently has an Earnings ESP of +0.59% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Trends Leading Up to ANF’s Q4 Results

ANF has been gaining from continued momentum in the Abercrombie brand, improvement in the Hollister brand and store-optimization efforts. The company has noted that its efforts to improve the positioning of the Hollister brand have been paying off. Investments across stores, digital and technology via its Always Forward Plan bode well.

In January 2025, Abercrombie provided a positive business update, thanks to a robust performance in the holiday season. The company noted that its fiscal fourth-quarter through holiday season performance was ahead of management’s expectations issued in November.

Net sales growth for the period was driven by comparable sales (comps) across regions and brands in the holiday selling period. This is backed by the 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. 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 a consistent free cash flow, are likely to boost growth.

Management expects net sales growth of 7-8% for the fiscal fourth quarter. The operating margin for the fiscal fourth quarter is projected to be 16%. This guidance does not include the impacts of 550 basis points from the 53rd week and about 50 basis points from foreign currency. The company retained its operating margin view of 16% and the 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 14-15%. Management expects an operating margin of 15% and an effective tax rate in the mid-20s for fiscal 2024. The sales outlook excludes the impacts of 120 basis points from the 53rd week.

Our model predicts fourth-quarter fiscal 2024 total revenues to increase 7.4% year over year. We expect sales for the Abercrombie brand to grow 6.6%. Sales for Hollister are expected to improve 8.2%.

However, Abercrombie has been witnessing elevated operating costs on higher technology expenses and incentive-based compensation. Additionally, inflation and increased investment for the 2025 Always Forward Plan initiatives are likely to have been concerning in the to-be-reported quarter. Our model estimates a year-over-year increase of 6% in adjusted operating expenses for the fiscal fourth quarter.

ANF’s Price Performance & Valuation

Abercrombie’s shares have exhibited a decline in the past year, underperforming its industry peers and the Zacks Retail-Wholesale sector. In the past year, the New Albany, OH-based company’s shares have declined 25% against the industry and the sector’s growth of 4.9% and 23.9%, respectively. The company has also lagged the S&P 500’s rally of 17.1%.

ANF’s One-Year Price Performance

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Although Abercrombie’s stock has declined, it has outperformed arch-rival American Eagle AEO, which has been struggling with a 45.7% decline in the same period. However, ANF has underperformed other competitors like Urban Outfitters URBN and The Gap Inc. GAP, which have rallied 35% and 17.7%, respectively, in the past year.

At the current price of $102.99, ANF trades at a 47.7% discount to its 52-week high of $196.99. It trades at a 3.9% premium to its 52-week low mark of $99.12.

From the valuation standpoint, ANF trades at a forward 12-month P/E multiple of 9.22X, lower than the industry average of 17.94X and the S&P 500’s average of 21.96X. Abercrombie’s valuation appears attractive at this level.

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Investment Thesis

Abercrombie has experienced impressive growth in recent years, driven by its commitment to premium casual apparel for men, women and children. Its rebranding, with a strong focus on jeans and millennial consumers, has significantly boosted sales, particularly for the Abercrombie brand.

ANF has strengthened its market position by capitalizing on fashion trends through digital initiatives and store optimization. These strategies have fueled strong sales and profitability growth. Abercrombie’s strategic transformation positions it for sustainable long-term success, enabling it to capitalize on market trends, maintain momentum and create value for shareholders.

Conclusion

Regardless of Abercrombie's stock movement following its fourth-quarter fiscal 2024 results, it remains a strong long-term investment option due to its solid fundamentals. The company's financial stability and operational efficiency are evident in its key metrics. With rebranding, digital expansion and store optimization efforts, Abercrombie is well-positioned for sustained growth, making the stock attractive even before the earnings release. However, caution is advised amid rising operating costs, led by higher compensation, inflation, marketing and technology expenses.

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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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