On Wednesday, JPMorgan (NYSE:JPM) updated its outlook on Abercrombie & Fitch (NYSE:ANF), increasing the price target to $167.00 from $144.00, while maintaining a Neutral rating on the stock. The firm's assessment followed Abercrombie & Fitch's first-quarter earnings report, which surpassed analysts' expectations.
Abercrombie & Fitch reported a first-quarter earnings per share (EPS) of $2.14, outperforming the estimated $1.74. This result was driven by higher-than-anticipated performance in several areas: consolidated revenues grew by 22.1% year-over-year, outpacing the projected 14.5%; gross profit margin expanded by 540 basis points year-over-year to 66.4%, exceeding the anticipated 64.9%; and operating expense rate demonstrated leverage of 290 basis points year-over-year to 53.8%, better than the expected 54.5%.
By brand, Abercrombie & Fitch's same-store sales saw a significant increase of 29%, which was above the estimated 20%, resulting in a two-year stack growth of 43%. Hollister's same-store sales grew by 13%, also surpassing the forecasted 8%, and showed an acceleration of 500 basis points on a two-year stack to 7%. CEO Horowitz noted a return to growth in Hollister Men's as a contributing factor to these strong results.
Looking forward, the management of Abercrombie & Fitch has raised its fiscal year 2024 outlook, now expecting net sales growth of approximately 10% year-over-year, which is double the previous guidance of 4-6%.
The operating margin forecast has also been increased to about 14%, up from the prior estimate of around 12%. These adjustments are attributed to anticipated higher gross margin rates and operating expense leverage, which are estimated to result in a fiscal year 2024 EPS of approximately $9.30, compared to the Street's estimate of $8.14.
For the near term, the company projects second-quarter revenues to grow by mid-teens year-over-year, which is notably higher than the Street's estimate of 7.8% year-over-year growth. This is based on expected EBIT margins of approximately 13-14%, which are above the forecasted 11.2%, leading to an anticipated EPS of around $2.10, roughly 40% higher than the Street's estimate of $1.52.
InvestingPro Insights
Following JPMorgan's updated outlook on Abercrombie & Fitch, a deeper dive into the company's financials through InvestingPro reveals some compelling data points. The market cap of Abercrombie & Fitch stands at a robust $9.45 billion, indicating a significant presence in the retail space. Furthermore, the company's gross profit margin impresses at 62.92% for the last twelve months as of Q4 2024, showcasing its efficiency in maintaining profitability.
InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period and that the stock has experienced a high return over the last year, with an astonishing 408.81% price total return. These insights suggest strong investor confidence and a positive outlook on the company's financial health. For investors looking to delve deeper, there are 17 additional InvestingPro Tips available for Abercrombie & Fitch, which can be accessed with an exclusive offer: use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
With the company's next earnings date approaching on May 29, 2024, and the stock trading near its 52-week high, these data points could be crucial for investors considering Abercrombie & Fitch as a potential addition to their portfolio.
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