Bull of the Day: Abercrombie & Fitch (ANF)

The “retail is dead” story pushed through every facet of the stock market. Malls were dying, and the brick-and-mortar crowd was on its death bed. Then, something strange happened. There was a split in the road between stores that offered no experience and tried to cut their way to profitability and stores that became a destination while gearing up their omnichannel presence to rival the strongest of online presences. Today’s Bull of the Day is one of those brick-and-mortar stocks that figured it all out.

Today’s Bull of the Day is Zacks Rank #1 (Strong Buy) Abercrombie & Fitch (ANF). The company is proving that sometimes the best comeback stories on Wall Street are hiding in plain sight. Remember when Abercrombie was supposed to be dead? The mall was dead. Teen retail was dead. The brand was stale. Amazon was going to eat everybody’s lunch.

Well, somebody forgot to tell Abercrombie. Today, ANF is a Zacks Rank #1 (Strong Buy), and the reason is exactly what I want to see in a Bull of the Day. That’s earnings estimates which are moving in the right direction. The current Zacks Consensus Estimate calls for fiscal 2027 earnings of $13.23 per share. That compares with $9.86 last year. Even better, the current-year estimate has moved 2.8% higher over just the last four weeks.

The Earnings Story Keeps Getting Better

The latest quarter gave analysts plenty of reasons to sharpen their pencils. Abercrombie delivered EPS of $2.42 versus the Zacks Consensus Estimate of $1.95. That’s a 24.1% positive earnings surprise. Revenue came in at $1.27 billion, another beat, and marked the company’s 15th consecutive quarter of sales growth. But there’s more going on here than one earnings beat.

Abercrombie & Fitch Company Price and Consensus

Abercrombie & Fitch Company price-consensus-chart | Abercrombie & Fitch Company Quote

Abercrombie-brand sales increased 8% while comparable sales increased 4%. APAC sales jumped 19%. Management then raised its full-year outlook, calling for roughly 5% sales growth and an operating margin of 14.5% to 15%. That is exactly the sequence bulls want to see: Beat the number. Raise the outlook. Watch the estimates follow.

There’s another piece of this story I like.

Abercrombie repurchased roughly $282 million worth of stock during the first half of the fiscal year, reducing shares outstanding by about 7% from where they started the year. Management now expects at least $500 million of share repurchases for the full year.

They have the flexibility to invest in stores, technology and growth while simultaneously shrinking the share count. That's a pretty good problem to have.

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This article originally published on Zacks Investment Research (zacks.com).

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