Abercrombie & Fitch Co. (ANF): Great Brands And A Great Plan

Page 1 of 2

Abercrombie & Fitch Co. (NYSE:ANF) shareholders have had a bit of a roller-coaster ride over the past several years.  This company has several brands that are and have been popular among the “cool kids” even since I was in high school.  However, as their products are relatively expensive, the recession of a few years ago hit Abercrombie particularly hard, as it did most retailers of “luxury” items.

With the massively declining sales during the recession, the stock hit a low of $13.66 in 2009, down from the peak of $85.77 just the year before.  Since then, the company’s cost-cutting and growth efforts have paid off; sales are up, and the shares have rebounded nicely.  With the company set to report earnings on February 13, shareholders will be looking for signs that in 2012 the company continued on the right path for growth.

Abercrombie & Fitch Co. (NYSE:ANF)Company Profile

Abercrombie has been around since 1892; however, it gained its widespread popularity much more recently, with most of its rapid growth occurring in the 1990’s.  Sales rose from $85 million in 1992 to $1 billion by 1999, and have continued to climb steadily to over $4 billion today.

The company operates four retail brands; Abercrombie and Fitch, Abercrombie Kids, Gilly Hicks, and Hollister Co., with a total of over 1,000 stores.  Most of the company’s stores are in the U.S., with 131 of the stores being international.

Abercrombie’s target demographic is the 7-24 age group, with a special emphasis on teenagers (and those who wish they were still teenagers).  According to consumer data reports, this age group accounts for 31% of apparel spending, with teenagers accounting for 18%.  Teens tend to have the most apparel spending influence of all age groups, which is the main reason that Abercrombie (and others) tailor their clothing lines to teens’ preference.

Growth Prospects

Abercrombie’s plans to increase shareholder value are more focused on getting rid of underperforming stores than they are on growth and expansion.  Since 2010 the company has closed 135 stores, with another 180 underperforming stores identified as possible closures by 2016.  The company wants the primary driver of growth to be increasing same-store sales, as well as increasing their online business, where overhead is much less.

That said, there are some international markets that Abercrombie has active plans to expand into, particularly the U.K, Canada, and Asia.  During 2013, the company plans to open a total of 40 stores (mostly Hollister) in those countries.

Finally, one of the best ways the company plans to return value to its shareholders is through its aggressive buyback program, which was increased this past year to authorized buybacks of 22.9 million shares.  Bear in mind, there are only 79.6 million outstanding shares currently.

Valuation

Speaking of creating shareholder value, those who invest now may be handsomely rewarded if the company’s plans pan out over the next few years.  When the company reports its earnings, the consensus calls for $2.98 per share for the fiscal year, meaning Abercrombie trades at 17.1 times earnings.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!