Abercrombie & Fitch Co. ANF posted strong fourth-quarter fiscal 2024 results, with sales and earnings surpassing the Zacks Consensus Estimate and showing year-over-year improvements. This marked the eighth consecutive quarter of bottom-line beat for the company.

Abercrombie’s earnings per share (EPS) of $3.57 in the fiscal fourth quarter jumped 20.2% from $2.97 in the year-ago quarter. Moreover, the bottom line beat the Zacks Consensus Estimate of $3.48. Robust earnings performance can be attributed to strong top-line growth, coupled with improved operating margins.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Net sales of $1.58 billion advanced 9% year over year on a reported basis and 10% on a constant-currency basis. The top line surpassed the Zacks Consensus Estimate of $1.56 billion. ANF’s comparable sales (comps) improved 14%. The top-line beat was driven by broad-based net sales growth across regions and brands, led by strong traffic.

Abercrombie’s shares fell 9.2% yesterday despite reporting strong fourth-quarter fiscal 2024 results. Shares of this Zacks Rank #3 (Hold) company have lost 30.7% in the past three months compared with the industry's 13.7% decline.

Although the company’s top line improved year over year, it marked a slowdown from the 14% sales growth reported in the third quarter of fiscal 2024, which displeased investors. Additionally, the gross margin saw pronounced impacts of higher freight costs, which are expected to continue ahead. In addition, it provided a bleak EPS view for the first quarter of fiscal 2025. For tariffs, the company’s outlook consists of U.S. tariffs on China, Canada and Mexico presently in effect. It expects impacts of about $5 million in the current fiscal year. The outlook excludes other potential incremental tariffs. Such factors might have hurt the investors’ sentiments.

Abercrombie’s Regional & Brand Sales Drive Growth

Sales in the Americas increased 11% year over year to $1.32 billion while EMEA sales rose 2% to $224.5 million. However, the metric fell 4% to $40.7 million in APAC. This marked the seventh consecutive quarter of double-digit sales growth in the Americas. Comps rose 15% in the Americas, 12% in EMEA and 17% in APAC regions.

Net sales improved 2% year over year to $772.7 million for the Abercrombie brand. Moreover, sales increased 16% to $812.2 million at Hollister. The Abercrombie brand contributed 48.8% to the total company sales, whereas Hollister contributed 51.2% to sales. Comps grew 5% for Abercrombie and 24% for Hollister in the quarter.

Our model predicted sales growth of 8.2% for the Abercrombie brand and 6.6% for Hollister. We estimated sales to increase 7.2% in the Americas, 9.5% in EMEA and 2.1% in APAC.

ANF’s Quarterly Performance: Margins & Expenses

Abercrombie’s gross margin of 61.5% in the fiscal fourth quarter contracted 140 basis points (bps) year over year, as improved average unit retail (AUR) from reduced discounts was more than offset by increased freight costs stemming from higher freight rates and air usage to aid delivery times.

Selling expenses were $526.4 million, which grew 5.5% year over year. As a percentage of sales, selling expenses fell 110 bps to 33.2%. General and administrative costs rose 0.6% to $194.5 million, while the metric, as a percentage of sales, decreased 100 bps to 12.3%.

The company reported an operating income of $256.1 million, up 14.9% from $222.8 million in the year-ago period. It registered an operating margin of 16.2%, up 90 bps from 15.3% in the year-ago quarter. This margin was backed by around 200 bps of leveraged selling, and general and administrative expenses, more than offset soft gross margin.

We estimated a 60-bps increase in the adjusted operating expense rate to 16% for the fiscal fourth quarter.

ANF’s Financial Health Looks Stable

Abercrombie ended the fiscal fourth quarter with cash and cash equivalents of $772.7 million, no net long-term borrowings and stockholders’ equity of $1.34 billion, excluding non-controlling interests.

The company had a liquidity of $1.2 billion at the end of the fiscal fourth quarter, which included cash and equivalents. Net cash provided by operating activities was $710.4 million as of Feb. 1, 2025. 

Management has also announced a new $1.3 billion share repurchase authorization. It expects to repurchase shares of $100 million in the first quarter and $400 million in fiscal 2025.

Abercrombie’s Q4 & FY24 Outlook

Management provided the view for the first quarter and fiscal 2025. For the first quarter of fiscal 2025, net sales are projected to rise 4-6% from $1.02 billion recorded in the year-ago period. The operating margin for the fiscal first quarter is expected to be 8-9%. It expects EPS to be in the band of $1.25-$1.45, lower than $2.14 reported in the year-ago quarter. The effective tax rate is expected to be about 25%.

For fiscal 2025, the company expects year-over-year sales growth in the range of 3-5% from $4.95 billion registered last fiscal. This upside is likely to be backed by growth across regions and brands. It also expects a 70-bps of adverse impact of foreign currency. The company anticipates an operating margin in the band of 14-15%. It anticipates the first half of fiscal 2025 to be hurt by increased year-over-year freight costs and more normalized carryover inventory selling, and the second half to benefit from estimated lower freight from the prior-year period.

For fiscal 2025, management envisions weighted average shares of around $51 million, which reflects the impacts of 2025 share repurchases. Combined with the tax rate, ANF predicts EPS to be in the bracket of $10.40-$11.40 compared with $10.69 delivered in fiscal 2024.

Abercrombie anticipates an effective tax rate of around 26% for fiscal 2025. Capital expenditure is estimated to be $200 million for the current fiscal year. 

For fiscal 2025, Abercrombie plans 60 store openings, together with 40 remodels and rightsizes, and 20 closures.

Key Picks in Retail

We have highlighted three better-ranked stocks, namely Boot Barn BOOT, Urban Outfitters URBN and Deckers DECK.

Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 14.9% from the year-ago figure. The company delivered a trailing four-quarter earnings surprise of 7.2%, on average.

Urban Outfitters, a fashion lifestyle specialty retailer, currently sports a Zacks Rank of 1. URBN delivered an average earnings surprise of 28.4% in the trailing four quarters.

The consensus estimate for Urban Outfitters’ current financial-year sales indicates growth of 5.9% from the year-ago figure.

Deckers, a footwear and accessories dealer, currently has a Zacks Rank #2 (Buy). DECK delivered an average earnings surprise of 36.8% in the trailing four quarters.

The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 15.6% from the year-ago figure. 

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

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Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report

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