ANF - Abercrombie & Fitch lands Buy rating from Argus with fundamentals on the mend

2023-06-12 09:55:12 ET

Abercrombie & Fitch Co. ( NYSE: ANF ) tracked slightly higher in early trading on Monday after Argus upgraded the mall retailer to a Buy rating from Hold.

Analyst Kristina Ruggeri highlighted that Abercrombie ( ANF ) has been transitioning away from larger-format, tourist-dependent flagship stores to a format that features smaller stores catering to local customers. A&G is also noted to have broadened its apparel offering to include office and special occasion clothing, as well as active apparel.

In terms of demographics, Abercrombie & Fitch ( ANF ) is refocusing the namesake banner on adults ages 22 to 45 due to a low level sales with teenagers. There is also some positive news with financials as ANF is seeing some margin relief due to lower freight costs and a reduced inventory level as supply-chain disruptions ease. The retailer is also said to be strengthening its digital capabilities, which could boost sales down the road.

Notably, Ruggeri said A&F gained market share in Q1 of FY24, helped by double-digit AUR growth for both the Abercrombie and Hollister banners.

"We think that ANF shares are undervalued at recent prices near $34, near the top of their 52-week range of $14-$35. On a technical basis, the shares had been in a bullish pattern of higher highs and higher lows that peaked in June 2021. They have traded mostly lower since that time, but have risen strongly since early May 2023."

Looking at fundamentals, ANF shares are noted to be trading at 16X Argus' FY24 EPS estimate, below the midpoint of the five-year historical range of 9X to 32X, but above the average for a peer group that includes American Eagle Outfitters ( AEO ) and Urban Outfitters ( URBN ).

Abercrombie & Fitch ( ANF ) were up 0.50% at 9:54 a.m.

More on Abercrombie & Fitch:

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