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Abercrombie (ANF) Ties Up with Zappos as Online Partner

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Abercrombie & Fitch Co. ANF collaborated with Zappos to expand its customer base across the United States for Abercrombie & Fitch apparel. Customers will now be able to shop denim, essential tops for adults and kids on Zappos.com from Aug 16.

To pair up with denim, both companies will launch an exclusive footwear capsule, available in a wide range of sizes on Zappos.com and Abercrombie.com. The footwear comes in eight styles such as an ankle boot, stovepipe boot, court sneaker and strappy heel, with sizes from 6 to 15.

Customers can use Zappos' Fit Finder to get the optimal pair of denim and shoes. As part of the deal, Zappos will highlight Abercrombie's denim in its denim shop through a two-week takeover. It will also feature Abercrombie outfit inspiration for Mom's & Mini's, which allow mothers and children to match outfits. Kids apparel on Zappos will include denim, tops and bottoms.

In another development, the company’s abercrombie kids brand is cheering people with the second season of the digital series namely — Kind Crew on Nickelodeon’s YouTube channel. The series will feature four kids and some special guests, talking on topics, including returning to school, focusing and leveraging one’s uniqueness.

The cast of Kind Crew will also interact with fellow kids on social media via posts and abercrombie kids brand accounts, which also includes an Instagram page. The show, which is being helmed by Velocity, a ViacomCBS’s branded content studio, garnered popularity in its first season, which addressed topics such as racism and the importance of voting.

What Else Should You Know?

Abercrombie has been gaining from strong digital momentum, the reopening of stores, gross margin expansion and tight expense management. Compared with the pre-pandemic levels of first-quarter fiscal 2019, net sales improved 6%, while digital sales improved nearly 81%.

The company has been witnessing strong digital momentum, driven by expanded digital and omni-channel capabilities, the addition of customers in the channel, high customer retention, and robust digital marketing efforts. In first-quarter fiscal 2021, digital net sales advanced 45% year over year, contributing about 52% of total company sales. It further plans to continue investing toward bolstering omni-channel capabilities, including curbside and ship-from-store services.

Store-wise, Abercrombie is working toward rationalizing its store base. As part of its store-optimization plans, the company plans to reposition larger format flagship locations to smaller omni-channel-enabled stores. In doing so, it earlier closed eight European flagship locations in fiscal 2020 and its brand’s store in Orchard Road Singapore flagship in the fiscal first quarter, bringing the flagships store count to six. Global store sales improved 77% year over year in the fiscal first quarter.

Driven by these factors, management anticipates net sales above the 2019 reported level of $841 million in second-quarter fiscal 2021. The company anticipates successfully managing the supply chain and labor constraints as well as continued tight inventory management.

The gross margin rate is likely to increase at least 200 bps in the fiscal second quarter from 60.7% reported in the prior-year quarter. It also remains optimistic about its ability to deliver AUR improvements through reduced promotions and clearance activity as well as potential foreign currency tailwinds.

Shares of this Zacks Rank #3 (Hold) stock surged 90.4% year to date compared with the industry’s growth of 16.9%.

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However, the company is still reeling under higher payroll and customer-facing expenses. Fiscal first-quarter marketing, general and administrative expenses rose 12% year over year on an increase in performance-based compensation and digital media expenses.

For fiscal 2021, it anticipates potential cost headwinds to partly offset gross margin growth. For second-quarter fiscal 2021, the company expects a year-over-year rise in operating expenses of 15-20% from adjusted operating expenses of $404 million reported last year.

Better-Ranked Stocks in the Retail Space

Gap GPS presently flaunts a Zacks Rank #1 (Strong Buy) and has an expected long-term earnings growth rate of 12%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hibbett Sports HIBB has a long-term expected earnings growth rate of 17.7% and it currently sports a Zacks Rank #1.

Capri Holdings Ltd. CPRI, a Zacks Rank #1 stock, has an expected long-term earnings growth rate of 19.8%.

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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report

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