Abercrombie & Fitch: Performing Well But Price Is Stretched, Back To Hold

Summary:

• Abercrombie & Fitch is fairly valued at $160 per share, driven by strong sales, record margins, and digital trends, but growth and margin sustainability are concerns.
• Hollister is accelerating while A&F is decelerating, with a shift from price-driven growth to unit-driven growth, impacting gross margins.
• Digital trends remain positive, but inventory costs are rising due to supply chain challenges, and future margin maintenance is uncertain.
• Valuation at an EV/NOPAT of 12x seems low but reflects optimism; I recommend a Hold at $160 and reconsidering at $140.

Abercrombie & Fitch (NYSE:ANF) is back to the $160 per share range, after reporting good results earlier this month, with 16% comparables, and a guide to close the year up 15% (on a calendar basis). The driver has been AUR but also unit

Analyst’s Disclosure: I/we have a beneficial long position in the shares of ANF either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.