Abercrombie & Fitch Company

ANF Details

Abercrombie & Fitch Company (NYSE: ANF) is a leading, global, omnichannel specialty retailer of apparel and accessories. The company caters to men, as well as women and kids through five renowned brands.

Decent Performance in Q3FY21 (For the Quarter Ended 30 October 2021)

• The company has recorded a 10% YoY increase in its total net sales or 5% from 2019 levels to $905 million with the digital net sales grew 8% YoY to $413 million to represent 46% of overall sales in Q3FY21.
• Coupled with better cost management, the company achieved an 8% operating margin, which marks its best third-quarter operating margin and income since 2012.
• Resultantly, the net income per diluted share increased to $0.77 and $0.86 on a reported and adjusted non-GAAP basis, respectively.

Source: Company Reports, Analysis by Kalkine Group

Recent Update

• On 4 February 2022, the company mentioned that it will declare its fourth quarter as well as full year 2021 results on March 2, 2022.

Outlook

The company provided an update on its outlook for the 2021 fiscal year and the fourth quarter of fiscal 2021, wherein it expects the net sales to grow in the range of 19% to 20% in FY21 compared to 2020 net sales of $3.125 billion and up 2% to 3% versus the 2019 net sales of $3.623 billion. Operating margin is forecasted to remain between of 9% to 10% in FY21, in-line with previous outlook, against the adjusted non-GAAP operating margins of 1.7% and 2.3% in fiscal 2020 and fiscal 2019, respectively.

For Q4FY21, the company expects net sales to increase by 4% to 6% compared to 2020 net sales of $1.122 billion and flat to down 2% compared to 2019 net sales of $1.185 billion, owing to ongoing U.S. and digital momentum. The company’s earlier outlook of up 3% to 5% to 2019 was impacted by additional unexpected and uncontrollable inventory receipt delays and increased COVID-related impacts and restrictions.

Key Risks

The company is exposed to the adverse impact of COVID-19 that causes disruption to its business. Its business would be affected by the changes in global economic and financial conditions and the resulting impact on consumer confidence and consumer spending. Fluctuations in foreign currency exchange rates could adversely impact its business.

Valuation Methodology: Price/Earnings Per Share-Based Relative Valuation (Illustrative)

Stock Recommendation

The stock has been valued using a Price/EPS multiple based relative valuation (on an illustrative basis) and the target price so arrived reflects a fall of low double-digit (in % terms). A slight discount has been applied to peer average Price/EPS multiple (NTM basis), considering its revised net sales outlook for Q4FY21 with sales expected to miss the previous forecast range and uncontrollable inventory receipt delays.

Considering the aforementioned factors, the current trading levels, and the associated business risks, we advise the investors to book profits.

We give a “Sell” rating on the stock at the current market price of $41.80 per share as of 16^th February 2022 as of 9.50 am New York (EST, USA).

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Abercrombie & Fitch Company (ANF) is a part of Kalkine’s Global Big Money Product

Note 1: The reference data in this report has been partly sourced from REFINITIV.