Have you taken advantage of Abercrombie & Fitch Co.’s ANF bull run in the past three months as the stock has gained nearly 25%. If not, then the time is right to add the stock as it looks very promising and is poised to carry the momentum into 2016. The company’s recent performance gives the indication that Abercrombie & Fitch is a favorite pick for investors. Let’s delve a little deeper to find out the reasons.
3 Concrete Factors Driving the Stock
Stellar Q3 and Impressive Earnings History: Abercrombie posted spectacular third-quarter fiscal 2015 results, wherein both the top and bottom lines exceeded expectations. In the face of adverse currency movements, the company’s strategies of developing omni-channel capacities, focusing on key merchandise and design processes, along with optimization of store fleet, helped it deliver better-than-expected results. Also, Abercrombie has outperformed the Zacks Consensus Estimate in three of the past four quarters, with an average positive earnings surprise of 87.1%. Following the stellar third-quarter fiscal 2015 performance, the Zacks Consensus Estimate for fiscal 2015 and fiscal 2016 earnings has moved up by 35.1% and 12.7% over the past 60 days to $1.04 and $1.15 per share, respectively.
Strategic Initiatives Underscore Potential: Abercrombie remains focused on reviving its brands, enhancing performance and returning to profitable growth. Consequently, the company has been implementing several steps to enhance its business. These initiatives include improving its leadership team and organizational structure; optimizing store fleet by introducing stores in high-performing markets, while closing the underperforming ones; remodeling stores and improving assortments to meet changing trends and demands; developing omni-channel capacities and focusing on key merchandise and design processes. Also, the company keeps its discounts low along with a check on promotional activities, in an attempt to enhance margins. We believe that the company is very much on track to bring a turnaround as management expects these efforts to revive its iconic brands and drive notable and sustained growth.
Hollister, an Attractive Global Expansion Option: Abercrombie is aggressively expanding its Hollister stores in new markets. The idea behind this is that its smaller size of operation makes it cheaper and less capital intensive compared to the company’s namesake brand. The growth of the Hollister brand internationally could enhance the company’s overall performance. As mentioned above, Hollister displayed noteworthy progress in third-quarter fiscal 2015, which along with the company’s international strength, contributed to sequential comps improvement. In fact, Hollister saw its comps trending up for the first time since 2012, recording 3% growth in the third quarter. Going forward, management expects this positive trend in Hollister to persist and drive results further.
Other Stocks to Consider
Other stocks that warrant a look in the retail sector include American Eagle Outfitters, Inc. AEO, Express Inc. EXPR and Foot Locker, Inc. FL. American Eagle Outfitters sports a Zacks Rank #1 (Strong Buy) whereas Foot Locker and Express hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment