ANF Bets on International Growth with Hollister

Apparel major Abercombie & Fitch (NYSE: ANF) is planning to launch its Hollister Co. store in France. This move comes on the success of its first Abercombie & Fitch store on the Champs- Élysées, Paris. ^[1] Abercrombie & Fitch competes with other specialty retailers like Aeropostale (NYSE:ARO), Gap (NYSE:GPS) and Urban Outfitters (NASDAQ:URBN). Our price estimate of $64 for Abercrombie & Fitch is roughly in line with the market price. Notably, Abercrombie & Fitch stores make up about 29% of our stock price estimate while Hollister stores contribute another 26%.

In the recent past, Hollister has been a hit for the company with Hollister revenues surpassing those of A&F brand. In the most recent quarter, Hollister’s comparable-store sales increased 11% versus an 8% increase for A&F stores. Though the company is expecting Q2 to be a little weaker, Hollister’s revenues this year itself may cover up for most of the company’s $350 million capital expenditure for opening 40 Hollister Stores. Moreover, the fact that the company is only planning to open up only five new international A&F locations (as compared to 40 for Hollister) goes to show where management is placing its bets for future growth. ^[2])

The Hollister brand offers a broad selection of apparels, accessories and personal care products, primarily targeting consumers in the age group of 14-18 years with the apparels carrying a laid back character associated with southern California. The lower prices associated with Hollister designer apparel has been a contributing factor for its success.

See our complete analysis of Abercombie & Fitch

1. Abercrombie & Fitch plans Hollister launch in France, Retail Week [↩]
2. A Modest Proposal For Abercrombie & Fitch, WSJ [↩]