ANF - Abercrombie & Fitch (ANF) stock broke this personal record
2024-01-03 07:08:26 ET
Abercrombie & Fitch (NYSE: ANF) stock price just did something it has not done since going public in 1996. The shares have risen in the past nine consecutive months and is sitting near its all-time high.
Its previous record of monthly gains happened in 2021 when the stock jumped for six straight months. It jumped by over 285% in 2023, making it the best-performing retail company in the US.
Abercrombie & Fitch stock vs S&P 500 vs Nasdaq 100
Why did Abercrombie & Fitch shares surge?
Abercrombie & Fitch’s management has implemented a remarkable turnaround leading to strong revenue growth in the past few quarters. The company’s revenue soared to over $1.056 billion in the third quarter, up from $880 million in the same period in 2023. Its total revenue in the past five quarters jumped to almost $5 billion.
Most importantly, Abercrombie & Fitch has also become more profitable. It made a net profit of $97.7 million in the last quarter, up from a $0.7 million loss in the same period in 2022. Its net profit rose from $17.8M to $58.7M and $97.7M in the past three straight quarters.
ANF did this by improving its inventory, which surged during the pandemic. Like all retailers, the company made more orders as the supply chain challenges continued. Inventory management is an important part of any retailers.
In the past, several retailers like Toys R Us and Sports Authority have collapsed because of inventory issues. Speaking of inventories, the CFO noted :
“With strong earnings and inventory management in the quarter, we continue to strengthen the balance sheet. We ended the quarter with cash of $649 million and liquidity of approximately $1 billion.”
What next for ANF stock?
Additionally, the company continued growing internationally, where it is becoming a more well-known brand. Its Americas revenue grew by 22% followed by 14% in EMEA and 13% in APAC. Precisely, the company is seeing strong demand in key markets like the UK and Germany.
Abercrombie & Fitch also benefited from the relatively lower inflation in 2023, steady retail sales, and the reopening from the Covid-19 lockdowns. Also, it has expanded its offerings to include workwear, special occasions, and active apparel.
ANF faces numerous challenges going forward. For one, while most Wall Street analysts are optimistic about the company, their targets is lower than the current stock price. Citigroup analysts have a target of $83 while UBS, Morgan Stanley, Telsey, and JP Morgan have a target of $75, $68, and $83, respectively.
Additionally, there are concerns that the company will not be able to replicate its past success in the future. Also, ANF is not cheap as it trades at a PE ratio of 23, which is higher than that of its peers.
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