What’s Going On With Abercrombie & Fitch Stock?

March 12th, 2025 by Trefis Team

Abercrombie & Fitch (NYSE: ANF), a specialty retailer of casual clothing and footwear, has underperformed the broader S&P 500 index this year, declining 47% compared to the index’s 3% drop. However, this recent pullback belies the company’s impressive long-term performance, with its stock price more than doubling over the past three years since 2022. ANF stock grew from approximately $35 in early 2022 to its current level of almost $80. The key factors influencing this movement include:

  1. A large 155% increase in the company’s earnings, which rose from $4.20 in 2021 to $10.69 in 2024; partly offset by 
  2. A 16% fall in the company’s trailing P/E ratio, which increased from 9x in 2021 to 11x in 2024, but currently stands at 9x, returning to its 2021 level

Image by Pexels from Pixabay

What Drove Abercrombie & Fitch’s Earnings Growth?

Abercrombie & Fitch’s Revenue growth has been primarily driven by the expansion of its high-margin namesake brand. The brand closed its underperforming brick-and-mortar store footprint, introduced inclusive marketing campaigns, and modernized its store formats while expanding product offerings for older shoppers. Additionally, A&F accelerated the growth of Abercrombie Kids and its e-commerce and social media channels, further optimizing its international operations and cost structure. A&F brands’ revenue grew at an 18% compounded annual growth rate (CAGR) from 2021 to 2024, significantly outpacing the company’s total revenue CAGR of 10%. Additionally, Hollister revenues also saw an 8% CAGR during the same period- thanks to its strong student demographic and growth in its women’s business. It should be noted that the company achieved its growth even as the inflationary headwinds impacted its growth in fiscal 2023.

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ANF demonstrated significant operating margin expansion, rising from 9.2% in 2021 to 15.0% in 2024. This substantial improvement was driven by expense leverage resulting from net sales growth, as well as reduced promotional activity stemming from a more conservative inventory management approach.

Notably, ANF achieved a remarkable 155% increase in earnings per share, surging from $4.20 to $10.69. This impressive earnings growth outpaced revenue expansion during this period, aided in part by a 15% reduction in outstanding shares. Building on this momentum, management has authorized a new $1.3 billion stock buyback program, with plans to allocate $400 million toward share repurchases in 2025.

What’s Behind The Falling Valuation Multiple?

Investor sentiment around ANF stock has been pressured due to its cautious guidance for 2025, which forecasts modest net sales growth of 3% to 5% and a potential decline in operating margin to 14%-15% due to trade tariff uncertainties. Despite capping off a record year in 2024 with revenues growing 16% year-over-year and earnings rising 72% y-o-y, the company’s recent pullback suggests the company may be undervalued relative to its growth potential. These factors have contributed to the stock’s lower P/E multiple. 

Beyond its recent underperformance, ANF stock has also been volatile. Over the past four years, its annual returns have varied significantly: 71% in 2021, -34% in 2022, 285% in 2023, and 69% in 2024, mirroring the fluctuations seen in the broader S&P 500. 

With the current economic uncertainty surrounding interest rate cuts and ongoing trade disputes, will ANF stock continue to underperform the S&P 500 in the next 12 months, or will it stage a strong rebound? From a valuation perspective, we believe ANF has considerable upside potential.

We estimate Abercrombie & Fitch’s Valuation to be $131 per share, indicating approximately 65% upside from its current price of $79. The stock is presently trading at a P/E ratio of 9x, below its four-year average of 14x. While some reduction in the valuation multiple is justified due to concerns over tariffs and potential inflation, we believe the recent decline presents a compelling opportunity for long-term investors.

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