Abercrombie & Fitch: Valuation Improving After The Drop


  • Abercrombie & Fitch released its Q1 results last month, managing to grow sales year-over-year despite difficult comps related to lapping government stimulus and contending with China lockdowns.
  • However, while sales performed well, the company did see meaningful margin compression, impacted by the accelerated sell-through of holiday inventory and higher material/freight costs.
  • This led to the company taking its FY2022 operating margin outlook down from 5-6% vs. 7-8% previously, setting the company up for a significant decline in earnings year-over-year.
  • At 9.3x FY2022 earnings estimates, much of the negativity around a potential pullback from consumers looks priced into the stock, but I still don’t see enough margin of safety just yet.

It was a rough Q1 Earnings Season for the Retail Sector (XRT), with companies reporting weaker than expected sales or softer margins and, in some cases, a mix of both, having to lap sales leverage from governments stimulus (Q1 2021). While Abercrombie & Fitch (

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.

Additional disclosure: Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

Leave a Reply

Your email address will not be published. Required fields are marked *