Can Abercrombie (ANF) Beat Q4 Earnings Amid Coronavirus Woes?
Abercrombie & Fitch Co. ANF is scheduled to report fourth-quarter fiscal 2021 results on Feb 2, before the opening bell. The leading apparel retailer is expected to register top-line growth when it reports fourth-quarter fiscal 2021 numbers.
The Zacks Consensus Estimate for fiscal fourth-quarter revenues is pegged at $1.18 billion, suggesting 5.4% growth from that reported in the year-ago quarter. The consensus mark for fiscal 2021 revenues is pinned at $3.7 billion, indicating growth of 19.4% from the prior-year reported figure.
For fiscal fourth-quarter earnings, the consensus mark is pegged at $1.28 per share, implying a decline of 14.7% from the year-ago quarter's reported figure. The consensus estimate has declined 3.8% in the past 30 days. The consensus estimate for fiscal 2021 earnings is pegged at $4.49 per share, indicating growth of 715.1% from the prior-year reported figure.
In the last reported quarter, the company's earnings beat the Zacks Consensus Estimate by 26.5%. ANF also has an earnings surprise of 112.5%, on average, for the trailing four quarters.
Abercrombie & Fitch Company Price and EPS Surprise
Abercrombie & Fitch Company price-eps-surprise | Abercrombie & Fitch Company Quote
Key Factors to Note
Abercrombie's fourth-quarter fiscal 2021 results are expected to reflect the impacts of the resurgence of COVID-19 cases due to the Omicron variant. On its recent update on the fourth quarter and fiscal 2021 outlook, the company noted that it witnessed weak inventory in key categories due to port congestion and transportation delays.
As a result, it failed to keep up with customer demand, which led to a loss in sales during the peak holiday season sales. Notably, the Hollister and Gilly Hicks brands suffered the most.
Management predicts fourth-quarter fiscal 2021 sales to be flat to down on a two-year basis compared with the earlier mentioned 3-5% rise. This can be attributable to unexpected inventory delays, as well as COVID-related impacts and restrictions. However, the metric is anticipated to grow 4-6% year over year to $1.122 billion.
The company’s gross margin is expected to be flat to the 2019 reported level of 58.2%. The view includes double-digit AUR improvement on both year-over-year and two-year basis, driven by lower promotions and markdowns.
On the flip side, the adverse impacts of $75 million of freight cost pressure due to the increasing ocean and air rates, as well as higher air deliveries, remain concerning. The company anticipates operating expenses, excluding other operating income, to be up in the low to mid-single digits to the adjusted level of $565 million reported in 2019.
For fiscal 2021, net sales are envisioned to rise 19-20% year over year and 2-3% on a two-year basis. The operating margin is estimated to be 9-10%, whereas it reported 1.7% and 2.3% in fiscal 2020 and 2019, respectively. The company expects capital expenditure of $90-$95 million, down from the previously communicated $100 million.
Despite the current health situation and ongoing disruptions, Abercrombie is expected to have witnessed strong customer demand in the fiscal fourth quarter, which is likely to result in the highest annual operating income and margin in more than 10 years, along with accelerated sales trend post the holiday season.
Sturdy demand for the company’s winter and holiday collection, particularly in jeans, dresses and sweaters, is likely to have contributed to its sales during the Black Friday/Cyber Monday period.
The company has been gaining from robust digital sales momentum, gross margin expansion and tight expense control. Lower promotions and markdowns, efficient expense management, and strategic investments across marketing, technology and fulfillment are likely to have aided the fiscal fourth-quarter performance.
The digital business is expected to have mainly benefited from the addition of customers in the channel, backed by robust digital marketing efforts. Also, high customer retention and spend per customer are likely to have boosted sales in the to-be-reported quarter. Abercrombie has been on track with its cost minimization measures.
What the Zacks Model Unveils
Our proven model conclusively predicts an earnings beat for Abercrombie this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Abercrombie has a Zacks Rank #3 and an Earnings ESP of +2.35%.
Other Stocks Poised to Beat Earnings Estimates
Here are some other companies you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat:
Dollar Tree DLTR currently has an Earnings ESP of +3.05% and a Zacks Rank of 2. The company is expected to have registered top-line growth in fourth-quarter fiscal 2021. The Zacks Consensus Estimate for DLTR’s quarterly revenues is pegged at $7.13 billion, which suggests a rise of 5.3% from the figure reported in the prior-year quarter.
You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Dollar Tree’s quarterly earnings moved up by a penny in the last seven days to $1.79 per share, suggesting a 16% decline from the year-ago quarter's reported number. DLTR has delivered an earnings beat of 8.8%, on average, in the trailing four quarters.
DICK'S Sporting Goods DKS currently has an Earnings ESP of +4.86% and a Zacks Rank #2. The company is anticipated to have registered top and bottom-line growth in fourth-quarter fiscal 2021. The Zacks Consensus Estimate for DKS’ quarterly earnings moved up by a penny in the last 30 days to $3.39 per share, suggesting 39.5% growth from the year-ago quarter's reported number.
The Zacks Consensus Estimate for DICK'S Sporting's quarterly revenues is pegged at $3.31 billion, suggesting growth of 6% from the figure reported in the prior-year quarter. DKS has delivered an earnings beat of 104.2%, on average, in the trailing four quarters.
Costco Wholesale COST currently has an Earnings ESP of +0.75% and a Zacks Rank #3. The company is expected to register top-line growth when it reports fourth-quarter fiscal 2021 numbers. The Zacks Consensus Estimate for COST’s quarterly earnings moved up 1.1% in the last 30 days to $2.67 per share, suggesting growth of 24.8% from the year-ago quarter's reported number.
The Zacks Consensus Estimate for Costco Wholesale's quarterly revenues is pegged at $51.1 billion, which suggests growth of 14% from the figure reported in the prior-year quarter. COST has delivered an earnings beat of 8.3%, on average, in the trailing four quarters.
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