Abercrombie on Course to Become a $1 Billion E-Commerce Brand

Even though a disappointing international business climate eclipsed the positive Q3 sales update on November 3rd for Abercrombie & Fitch (NYSE:ANF), ^[1] a solid growth of 41% in its direct-to-consumer business will help lead the teen apparel retailer achieve its goal of $1 billion in internet sales. E-commerce sales have become a major focus area for teen apparel retailers such as American Eagle Outfitters (NYSE:AEO), Aeropostale (NYSE:ARO) and Gap Inc. (NYSE:GPS).

We currently have a price estimate of just about $64 for Abercrombie’s stock, which is about 15% ahead of the market price

See our full analysis for Abercrombie & Fitch

Abercrombie looks all set to achieve its $1 billion internet sales target:

In the second quarter, Abercrombie emphasized growth in its direct to consumer business as its prime strategy in the near term. The company has reiterated its target to become a $1 billion e-commerce brand in the foreseeable future largely as a result of its global shipping initiatives. With solid growth of 41% this quarter, Abercrombie is well positioned to achieve its target. Internet sales accounted for 12.4% of total sales this quarter compared with 11.1% last quarter and 10.6% in the third quarter of 2010.

Additionally the increasing contribution of internet sales will also help Abercrombie improve margins since the direct to consumer business model carries higher margins than the retail business.

See our article: Technology’s Implications for Teen Retailers: Rising eCommerce & the Smartphone Generation

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1. Abercrombie provides Q3 sales update, Source: Abercrombie & Fitch’s IR [↩]