Abercrombie & Fitch (ANF) stock is spiraling Wednesday even after the parent company of the Abercrombie and Hollister retail brands beat top- and bottom-line expectations for its second quarter and raised its full-year outlook.
In the 13 weeks ended August 3, ANF's revenue increased 21.2% year-over-year to $1.13 billion, driven by 25.9% growth at its Abercrombie brand to $582.4 million. The company said earnings per share (EPS) more than doubled from the year-ago period to $2.50.
"The strength of our brand portfolio and improvements we've made in global capabilities resulted in broad-based growth across regions, brands and channels," said Abercrombie & Fitch CEO Fran Horowitz in a statement. "Consistent with the first quarter, we delivered improved profitability driven by gross profit rate expansion and operating leverage, with a second quarter operating margin of 15.5% and record second-quarter operating income of $176 million."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The results surpassed analysts' expectations. Wall Street was anticipating revenue of $1.1 billion and earnings of $2.22 per share, according to Yahoo Finance.
As a result of its strong performance in the first half of the year, ANF raised its outlook for the full fiscal year. The company now anticipates revenue growth in the range of 12% to 13% and an operating margin of 14% to 15%. This compares to the retailer's previous forecast of revenue growth of roughly 10% and an operating margin of about 14%.
For the third quarter, ANF said revenue should grow in the low double-digits compared to the year-ago period, while its operating margin should arrive between 13% to 14%.
Some media outlets are pointing to Abercrombie's operating margin forecast as one reason why the stock is selling off today, considering it is slower than Q2's operating margin of 15.5%.
Others are suggesting Horowitz's comments that the retailer continues "to operate in an increasingly uncertain environment" as another catalyst. Still, the executive added that the company remains "steadfast in executing our global playbook and maintaining discipline over inventory and expenses. We are on track and confident in our goal to deliver sustainable, profitable growth this year, while making strategic long-term investments across marketing, digital and technology and stores to enable future growth."
Is ANF stock a buy, sell or hold?
Heading into Wednesday's session, Abercrombie & Fitch shares were up nearly 90% for the year to date, making the retailer one of the market's top-performing consumer discretionary stocks.
Even with today's drop, ANF is still up roughly 60%. And Wall Street sees further upside for the stock. According to S&P Global Market Intelligence, the consensus analyst target price for ANF stock is $192.50, representing implied upside of about 37% to current levels. Meanwhile, the consensus recommendation is Buy.
But not everyone is a bull. William Blair analyst Dylan Carden is "encouraged by everything Abercrombie has done to add relevance and age up the Abercrombie brand, all of which are likely very real and sustainable." He adds that the company's "strategy of getting better product in front of more customers and messaged in a more thoughtful and relevant manner is a wholesale DNA shift that is not a fleeting trend."
However, Carden has a Market Perform rating on ANF stock, which is the equivalent to a Hold, on concerns over how long the retailer can maintain its recent momentum both on and off the price charts.
Related Content
-
Fired Up By the Masters and RBC Heritage? See These Homes for Sale By Golf CoursesFive homes for sale near golf courses, for people who can't get enough of the tour.
-
The Economic Impact of the US-China Trade WarThe Letter The US-China trade war will impact US consumers and business. The decoupling process could be messy.
-
My First $1 Million: Literacy Interventionist, 59, ColoradoEver wonder how someone who's made a million dollars or more did it? Kiplinger's new My First $1 Million series uncovers the answers.
-
Will My Children Inherit Too Much?If you worry about how your children will handle an inheritance, you're not alone. Luckily, you have options — from lifetime gifting to trusts — that can help.
-
Charitable Giving Lessons From Netflix's 'Apple Cider Vinegar'Charity fraud is rife, and a Netflix series provides a timely warning about donating money to a good cause without looking into its background.
-
What Happens To Mortgage and Savings Rates If Trump Fires Jerome Powell?President Donald Trump expressed his desire to remove Fed Chair Jerome Powell. If the president is successful, how would it impact your savings accounts?
-
Why You Need a Trusted Contact for Your BrokerageYour brokerage or bank needs someone to reach out to if it's concerned you're experiencing fraud or cognitive decline. That's where a trusted contact can help.
-
Four Takeaways From Filing Your Taxes to Boost Your Financial FutureNow that another tax season is in the rearview mirror for most of us, what lessons can you take from what you learned about your finances to plan for the future?
-
What Claims Adjusters Are Thinking vs What They're SayingAfter a natural disaster, few of us are at our best, but here's what to keep in mind when you're interacting with your insurance company's claims adjuster.
-
Looking to Make a Job Change? How to Stand Out Like a ProTo make a strong first impression in interviews or when networking, skip your job title and work history and use an opening gambit that highlights your talents.
