Why Abercrombie & Fitch’s Stock May Need To Take A Breather Before Its Next Bull Run

Summary:

  • Abercrombie’s stock is down 30% since May as most investors are concerned about slower growth in the year’s second half, especially in Q4.
  • Despite this concern, the fundamentals of the company are solid, with robust revenue growth, improved margins, minimal debt, and strong operating and free cash flows.
  • Increased SG&A spending from promotional and marketing efforts could impact Q4 profitability, especially since the holiday season usually involves heavy discounting.
  • Liquidity is strong, with significant cash reserves and zero long-term debt after debt repayments in Q2.
  • I maintain a Hold rating for now. However, I could upgrade to a buy following Q3 earnings results and management’s updates on full-year guidance. My main concern prior to Q3 earnings is a sell-off similar to Q2.

Abercrombie & Fitch, The Grove, Los Angeles

anouchka

Abercrombie & Fitch Co. (NYSE:ANF) has been an outstanding performer in the apparel retail industry, outperforming the S&P 500 over the last five years by more than 600%.

Despite these impressive returns, the share price has seen a recent


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