The Upside for ANF Stock
Almost every single investor knows that Abercrombie & Fitch Co. (NYSE:ANF) is America’s most hated retailer. That unsavory truth has caused a lot of anxiety about ANF stock, but there are signs the company is going to emerge from the crisis unharmed.
It’s an open secret that Abercrombie is out of favor with the American public. But we couldn’t quantify it until the “killer survey.” For the first time ever, Abercrombie was added to a list of retailers in the American Consumer Satisfaction Index.
I wouldn’t say anyone was surprised that ANF came in dead last, but the poor score was not encouraging to investors. It may, however, have kicked the company into action.
I took a solid look at Abercrombie’s earnings release, and although I still recommend caution, there’s plenty to get excited about. Here are three main takeaways:
The Bleeding Has Stopped
One of the key markers in retail is same-store sales. ANF stock was being dragged down by the company’s declining same-store sales, until something miraculous happened in 2015—we started to see the number drop. It fell from nine percent in the first quarter to seven percent in the second and five percent in the third. Now, the metric has turned positive for the first time since 2012. (Source: “Abercrombie & Fitch has become completely unrecognizable, and it’s starting to pay off,” Business Insider, March 2, 2016.)
Abercrombie had one percent same-store sales in the last quarter of 2015. It would seem that the wound is starting to heal.
Hollister Is the Real Breadwinner
What’s the secret to Abercrombie’s turnaround? Easy, it’s Hollister, a lifestyle brand targeted toward teenagers. Same-store sales were up four percent at the subsidiary, helping to lift the company’s overall numbers into positive territory. Hollister’s success drove the company to higher profits as well. Net income went from $44.4 million to $58.9 million. (Source: “Abercrombie & Fitch Surprises Investors With Same-Store Sales Gain,” Forbes, March 2, 2016.)
Abercrombie Is Now Targeting 18–25-Year-Olds
The company is now remaking its flagship brand for a whole new demographic. It’s shifting away from the teenager market, which makes sense considering how strongly Hollister is performing. Also, why go where you’re not wanted?
Abercrombie stores have stripped down and remodeled. The fall line looks more mature and classic than one would expect from a provocateur. ANF seems to have abandoned the shock and awe strategy for something more like H&M. I think this is exactly the right move.
All in all, these three reasons paint a very rosy picture for ANF stock. I’m very excited to see this stock catapult in 2016.