Abercrombie & Fitch Co. (ANF): This Teen Retailer Is a Good Bet

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It has increased its capital expenditure for the year significantly for store expansion and store remodeling. It has also invested in the new distribution centre which will help to supply for demand across channels.

Aeropostale Inc (NYSE:ARO) has focused on its better operating performance this year with recently integrated allocation optimization tools. It has reported slightly above consensus results in the first quarter this year, but EPS was -$0.16.

It will look for better performance with more structural changes in merchandising assortment. Its key fashion categories, including color and print bottoms, will drive sales growth. It will look forward to gain market share with increased inventory levels in back to school selling season.

P/S ratio Op. margin 1 Yr. Fwd. P/E
Abercrombie & Fitch 1.15 -1.66 12.68
American Eagle Outfitters 1.32 6.74 11.63
Aeropostale 0.6 -4.53 21.89

Source: Google Finance and Yahoo! Finance

Abercrombie & Fitch reported operating margin of -1.66% and a 1-year forward P/E of 12.68. American Eagle Outfitters (NYSE:AEO) has the highest operating margin of 6.74% and lowest forward P/E of 11.63 among the three mentioned peers. Aeropostale Inc (NYSE:ARO) has the lowest operating margin -4.53% and a forward P/E of 21.89.

Conclusion

Abercrombie & Fitch Co. (NYSE:ANF) has taken strong initiatives to improve its margins growth this year. Its cross-function initiatives with seven identified streams and recently completed market research study will help it to increase margins growth. The company’s international stores have better margins, and they will drive margin growth with increased store counts this year. It has a share repurchase program in place and increased its quarterly dividend for the first quarter. Its initiatives will drive its overall growth in the future. So, I will recommend a Buy.

The article This Teen Retailer Is a Good Bet originally appeared on Fool.com and is written by Ash Sharma.

Ash Sharma has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Ash is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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