Abercrombie & Fitch Earnings Loom : Stock (NYSE: ANF) Down 50% YTD, Rallying off Lows

Abercrombie & Fitch's stock (NYSE: ANF) has started 2025 under a cloud, and with earnings due this morning before the open, there will be plenty of holders looking for news that can significantly shift sentiment bullish. Since the start of this year, the ANF stock price has shed 49.65%, reversing has previously been a very bullish run up in 2024 that had seen prices swell 80%.

Such has been the reversal, the stock is now trading at levels last seen in December 2023, with the chart looking somewhat akin to a mountain range. Now in a period of consolidation, with a 15% move off the lows, and 5.44% in gains during yesterday's session, all eyes turn to earnings for clues as to what the future may hold.

For the upcoming period, analysts are expecting an EPS of $1.33, a decline from the YoY period of $2.14. Revenue is expected to rise by 3.82% however, with $1.06 billion expected versus $1.02 billion.

Abercrombie & Fitch has demonstrated impressive operational improvements over recent years. The company expanded its operating margin from 9.2% in 2021 to 15.0% in 2024, driven by expense leverage from sales growth and reduced promotional activity due to more conservative inventory management.

The company achieved a remarkable 155% increase in earnings per share, growing from $4.20 to $10.69, with earnings growth outpacing revenue expansion during this period. Its global footprint, spanning the Americas, EMEA, and APAC, has provided diversification and growth opportunities. The Hollister brand, in particular, has been a standout performer, bolstering the company’s resilience amid a challenging retail landscape.

Despite these strengths, several factors have weighed on ANF’s valuation. The company recently withdrew its fiscal guidance due to uncertainty surrounding U.S. tariffs, mirroring challenges faced by other major retailers such as Target and Walmart. Rising tariffs have pressured margins and forced price increases, dampening consumer demand.

Broader economic concerns have also played a role. Signs of slowing consumer spending and apprehensions about the U.S. fiscal outlook have cast a shadow over the retail sector. ANF’s price-to-earnings (P/E) ratio of 9x, well below its four-year average of 14x, reflects both potential undervaluation and investor caution.

The Analyst's View

• UBS increased Abercrombie & Fitch's target price from $115 to $130, maintaining a Buy rating. Their optimism stems from the strong performance of the Hollister brand, with expectations that earnings will outperform by $0.04.
• JPMorgan adjusted its target price from $155 to $142, while maintaining an Overweight stance, suggesting continued confidence despite the lower target.
• Jefferies lowered its target price from $170 to $135 but retained a Buy rating, indicating belief in the company's long-term potential despite near-term challenges.
• Trefis estimates Abercrombie & Fitch's valuation to be around $131 per share, suggesting a potential 65% upside from its price of $79 in March 2025.

The current share price is now close to the lower end of analyst price targets, which range from $71.00 to $142.00. The average price target implies a potential upside of nearly 50% from current levels.

🟩 The Bull Case for NYSE: ANF

• Operational Excellence: Margin expansion and strong earnings growth highlight effective management and brand strength.
• Analyst Upside: Price targets suggest significant upside from current levels.
• Valuation: Trading at a below-average P/E ratio, ANF may be undervalued relative to its historical norms and peers.
• Brand Momentum: Hollister and core Abercrombie brands continue to resonate with consumers globally.

🟥 The Bear Case for NYSE: ANF

• Macro Headwinds: Economic uncertainty, slowing consumer spending, and tariff risks threaten profitability and growth.
• Guidance Withdrawal: Lack of fiscal guidance increases uncertainty and may deter investors.
• Volatility: Recent sharp price swings and a rapid decline from all-time highs raise questions about stability.
• Sector Pressures: The broader retail sector faces persistent challenges, which could limit upside.

Abercrombie & Fitch's latest earnings could prove more pivotal than many in recent times, particularly if there is positive momentum, and a reinstatement of guidance. The company’s operational improvements and brand momentum provide a strong foundation for recovery, yet macroeconomic headwinds and market volatility continue to exert downward pressure on the stock. Those with conviction in the company’s long-term strategy and resilience may find the current valuation attractive, while more cautious investors may prefer to wait for greater clarity on tariffs and consumer demand.