Abercrombie & Fitch Company

ANF Details

Abercrombie & Fitch Company (NYSE: ANF) is a leading, global, omnichannel specialty retailer of apparel and accessories.

Result Performance for Q3FY21 (For the Quarter Ended 30 October 2021)

• The company’s total net sales increased to $905.2 million in Q3FY21, up 10.4% from FY2 Q3FY20. The digital net sales grew 8% YoY to $413 million to represent 46% of overall sales in Q3FY21.
• It reported a profit of $47.2 million, an increase of 11.6% in Q3FY20.
• Total liabilities decreased to $2.2 billion, down 9.2% on the same period last year.

Source: Company Reports, Analysis by Kalkine Group

Recent Update

After the robust start to the quarter in inventory receipts as well as product sell-through, the company witnessed unexpected inventory receipt slides in the key categories because of extended port as well as transportation delays.

Key Risks

The company is exposed to credit, market, and liquidity risk that arises in the normal course of the business. The company is also prone to the risks related to the COVID-19 pandemic, which can cause disruptions to the company’s business.

Outlook

The company expects to minimise the gross margin impact of late deliveries by balancing promotional depth and utilising pack-and-hold where appropriate. For the fourth quarter of fiscal 2021, the company anticipates to net sales growth between 4% to 6% as compared to 2020 net sales of $1.122 billion and flat to down 2% as compared to 2019 net sales of $1.185 billion, implying ongoing U.S. as well as digital momentum.

Valuation Methodology: Price/EPS Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Orange Color Line Reflects RSI (14-Period)

Stock Recommendation

The stock has been valued using Price/Earnings Per Share based relative valuation (on an illustrative basis) and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to Price/Earnings Per Share Multiple (NTM) (Peer Average) considering enhancing digital and omnichannel capabilities as well as decent outlook.

Considering the aforementioned factors, we give a “Buy” recommendation on the stock at the closing market price of $33.92 per share on 13^th January 2022.

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.

Note  2:  Investment decisions should be made depending on the investors’  appetite on upside potential,  risks,  holding duration,  and any previous holdings.  Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided. 

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance:  A  level where-in the stock prices tend to find resistance when they are rising,  and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.