Abercrombie & Fitch Company

ANF Details

Abercrombie & Fitch Company (NYSE: ANF) is a leading, global, omnichannel specialty retailer of apparel and accessories.

Decent Performance in Q3FY21 (For the Quarter Ended 30 October 2021)

• The company has recorded a 10% YoY increase in its total net sales or 5% from 2019 levels.
• ANF’s gross profit rate fell by 30 basis points on the one-year as well as increased 360 basis points on the two-year basis, benefiting from the AUR improvements, offset by the higher supply chain costs.
• However, coupled with better cost management, the company achieved an 8% operating margin.

Exhibit 1: Performance Trend

Source: Analysis by Kalkine Group

Recent Update

• In the press release dated 4 November 2021, the company informed that it has been named one of the 2021 Best Workplaces in Retail™ by Fortune magazine and Great Place to Work®.
• The company, on 28 October 2021, introduced a same-day delivery service across its entire U.S. store fleet. The company has joined hands with Uber, Shipt, Postmates, Roadie and software provider Delivery Solutions to expand the fulfillment capabilities as well as allow customers in the certain zip codes to receive products from the stores within the same day.

Key Risks

The company is exposed to the adverse impact of COVID-19 that causes disruption to its business. Its business would be affected by the changes in global economic and financial conditions and the resulting impact on consumer confidence and consumer spending.

Outlook

ANF remains focused on accelerating investments in digital, data, and technology to boost agility and enhance customer experience. The retailer is also emphasising on augmenting its marketing investments to drive further momentum across brands and geographies.

Notably, the company is witnessing a promising start to the holiday season. Meanwhile, the company is actively managing the continuing supply chain constraints and remains confident of having the product, marketing voice, and omnichannel experience in place to fulfill the new and existing customers’ requirements throughout the fourth quarter.

Valuation Methodology: Price/EPS Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Orange Color Line Reflects RSI (14-Period)

Stock Recommendation

The stock has been valued using a Price/EPS multiple based relative valuation (on an illustrative basis) and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to peer average Price/EPS multiple (NTM basis) considering the focus towards accelerating the investments as well as decent outlook.

Considering the aforementioned factors, we give a “Buy” recommendation on the stock at the closing market price of $34.370 per share, up by 0.85% on 15^th December 2021.

Abercrombie & Fitch Company (NYSE: ANF) is a part of Kalkine’s Global Big Money Product

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.