On Tuesday, Jefferies updated its outlook on Abercrombie & Fitch Co. (NYSE:ANF), increasing the price target to $220 from the previous $215, while keeping a Buy rating on the stock.
The firm anticipates that the company's earnings per share (EPS) will grow approximately 7% from fiscal year 2025 to fiscal year 2027, which is higher than the roughly 4% growth expected by the broader market consensus.
According to Jefferies, several key drivers are contributing to Abercrombie & Fitch's increased productivity, which may lead to an expansion of the operating margin (OM).
The firm's analysis suggests that there is approximately a 50% productivity gap between Abercrombie & Fitch and its peers. With the company's initiatives to boost sales and optimize costs, Jefferies believes this gap could narrow over time.
The financial institution is modeling for Abercrombie & Fitch's EPS to rise to $11.86 by fiscal year 2027, in contrast to the consensus estimate of $11.17 among other analysts. This projection reflects a more optimistic view of the company's ability to enhance profitability and achieve growth in the coming years.
Jefferies' updated price target and maintained Buy rating indicate a positive outlook for Abercrombie & Fitch, based on the company's potential to improve its financial performance and close the productivity gap with competitors. The firm's analysis points to a strategic plan that could lead to increased sales and more efficient cost management for the fashion retailer.
In other recent news, Abercrombie & Fitch has reported record net sales and operating profit for the second quarter of 2024. The company's net sales increased by 21% to $1.1 billion, and it reported an operating margin of 15.5%. As a result, Abercrombie & Fitch has raised its full-year sales and profitability forecasts, indicating confidence in its business strategy.
The company's gross profit rate grew to 64.9% due to lower cotton costs and reduced promotions, while operating expenses rose due to investments in marketing and technology. However, Abercrombie & Fitch ended the quarter with $738 million in cash and liquidity of approximately $1.2 billion.
These recent developments include the company's plans to open 60 new stores, remodel or right-size 60 stores, and close 40 stores, despite facing headwinds from increased freight costs and a 9% rise in inventory levels. The company's net income per diluted share was $2.50, a significant increase from $1.10 last year. Abercrombie & Fitch is optimistic about its performance and plans to continue investing in its brand and infrastructure.
InvestingPro Insights
Complementing the positive outlook from Jefferies, real-time data from InvestingPro shows Abercrombie & Fitch Co. (NYSE:ANF) with a robust set of financial metrics. The company boasts an impressive gross profit margin of 64.6% over the last twelve months as of Q2 2025, highlighting its efficiency in managing production costs relative to sales. This aligns with Jefferies' assessment of Abercrombie & Fitch's initiatives to optimize costs.
InvestingPro Tips indicate that four analysts have revised their earnings upwards for the upcoming period, offering further evidence of the company's strong potential for growth. Additionally, the company has demonstrated a high return over the last year, with a price total return of 170.77%, reflecting investor confidence and market performance that outpaces many competitors. With a market capitalization of $7.54 billion and a forward-looking P/E ratio of 14.84, Abercrombie & Fitch appears to be positioned for sustainable growth.
For readers interested in deeper analysis, InvestingPro provides additional tips on Abercrombie & Fitch, available at https://www.investing.com/pro/ANF. These insights could offer valuable guidance for investors considering Abercrombie & Fitch as part of their portfolio.
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