On Wednesday, CFRA increased its price target for Abercrombie & Fitch Co. (NYSE:ANF), a leading apparel retailer, from $120 to $149 while maintaining a Hold rating on the stock.
The revised target reflects a 24% increase and is based on a forward price-to-earnings (P/E) multiple of 17.5 times the firm's fiscal year 2025 (January) earnings per share (EPS) estimate. This P/E ratio is higher than the company's three-year average forward P/E of 14.2 times. The adjustment comes in the wake of strong performance by the Abercrombie brand and growth that outpaces its peers.
The firm has raised its fiscal year 2025 EPS estimate for Abercrombie & Fitch by $1.50 to $8.50 and the fiscal year 2026 estimate by $2.00 to $7.00. The company recently reported a normalized EPS of $2.14 for the first quarter, surpassing consensus estimates by $0.42. Revenue for the quarter reached $1.02 billion, beating estimates by $56 million and showing a significant increase from the previous year's $836 million.
Abercrombie's revenue growth was notable across its brands, with the Abercrombie brand itself seeing a 31% year-over-year increase, while the Hollister brand experienced a 12% rise. Geographically, the Americas led with a 23% increase, followed by the EMEA region with a 19% rise, and APAC with a 10% growth in the same period. The company also reported a substantial expansion in its first-quarter gross margin, which widened by 540 basis points to 66.4%.
Abercrombie & Fitch has provided guidance for the full fiscal year, projecting revenue growth of 10% and an operating margin of approximately 14%. However, it anticipates that growth may slow down in the latter half of the year. Despite the positive performance and strong financial health highlighted by the company's robust balance sheet, CFRA remains neutral on Abercrombie & Fitch shares due to valuation considerations. The firm acknowledges that the retailer continues to execute its business strategy effectively.
InvestingPro Insights
In light of Abercrombie & Fitch Co.'s (NYSE:ANF) recent performance and CFRA's updated price target, it's valuable to consider additional insights from InvestingPro. The company's market capitalization stands at a solid $9.13 billion, indicating a substantial presence in the retail sector. Abercrombie & Fitch's P/E ratio is currently 27.23, which is above the forward P/E multiple of 17.5 times used by CFRA in their analysis for fiscal year 2025. This higher P/E ratio may factor into CFRA's decision to maintain a Hold rating despite the price target increase.
The company's impressive gross profit margin of 62.92% for the last twelve months as of Q4 2024 underscores its efficiency in managing production and sales costs, a point that aligns with CFRA's observation of margin expansion. InvestingPro Tips also highlight Abercrombie & Fitch's strong revenue growth, which at 15.76% for the last twelve months as of Q4 2024, supports the company's positive outlook and CFRA's revenue growth projections.
For investors looking to delve deeper into Abercrombie & Fitch's financial health and stock performance, InvestingPro offers additional tips, including the company's ability to cover interest payments with its cash flows and the fact that liquid assets exceed short-term obligations. These points may provide further confidence in the company's financial stability. There are 18 additional InvestingPro Tips available for Abercrombie & Fitch, which can be accessed at https://www.investing.com/pro/ANF. To gain more insights and take advantage of these tips, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.