ANF - Abercrombie & Fitch: Valuation Improving After The Drop

• Abercrombie & Fitch released its Q1 results last month, managing to grow sales year-over-year despite difficult comps related to lapping government stimulus and contending with China lockdowns.
• However, while sales performed well, the company did see meaningful margin compression, impacted by the accelerated sell-through of holiday inventory and higher material/freight costs.
• This led to the company taking its FY2022 operating margin outlook down from 5-6% vs. 7-8% previously, setting the company up for a significant decline in earnings year-over-year.
• At 9.3x FY2022 earnings estimates, much of the negativity around a potential pullback from consumers looks priced into the stock, but I still don't see enough margin of safety just yet.

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