Abercrombie & Fitch (ANF) Enters Activewear Space With YPB
Abercrombie & Fitch Co. ANF has entered the activewear space through its newly launched sub-brand, YPB or Your Personal Best. The new brand is offering leggings, shorts, tanks, gym bags and baseball caps for men and women. The product line comes in sizes ranging from XXS to XXL at prices from $29 to $100.
The move is a part of its rebranding efforts. YPB’s addition to the company’s ever-evolving clothing portfolio is likely to address the customer demand for more activewear options. The recent development is expected to help expand the customer base, particularly amid millennials.
YPB also features super-soft, squat-proof and breathable bottoms, performance tops with four-way stretch, sweat-wicking and anti-odor elements, studio outer layers, and trending fashion details like cutouts and straps. The products also come in neutral colors. Customers can currently avail of it at www.abercrombie.com and stores.
What’s More?
Abercrombie has been undertaking efficient expense management efforts, as well as strategic investments across marketing, technology and fulfillment. The company’s adjusted operating margin reflected gains from prudent expense management strategies in the fourth quarter of fiscal 2021. Notably, the operating margin expanded 310 bps to 8.6%. Management remains on track to control spending by reducing occupancy costs through store closures and right-sizing. The company has been leveraging some of its structural cost-savings to boost top-line growth through investments in brand marketing, digital experience, and growing Gilly Hicks and Social Tourist brands.
As part of its store optimization efforts, ANF plans to reposition larger-format flagship locations to smaller omni-channel-enabled stores. Progressing on these efforts, the company closed 21 stores in the fiscal fourth quarter. This brings the total store closures to 44 in fiscal 2021.
Moving on, this Zacks Rank #3 (Hold) company is making significant progress in expanding digital and omni-channel capabilities to better engage with consumers. Despite the store reopening, the company’s strong digital momentum continued in fourth-quarter fiscal 2021, boosting the top line.
Even as customers returned to stores, digital sales rose 17% to $556 million, and represented 48% of total sales. ANF plans to continue investing toward bolstering omni-channel capabilities, including curbside and ship-from-store services. It is also striving to optimize capacity at its distribution centers to meet increased digital demand.
Driven by these factors, net sales of $1,161.4 million advanced 4% year over year in the fiscal fourth quarter. For first-quarter fiscal 2022, net sales are expected to grow in the low-single digits. The stock fell 4.6% in the past three months compared with the industry’s decline of 24.2%.
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However, higher freight costs, resulting from supply-chain woes and increased operating expenses due to elevated payroll and marketing expenses, remain concerning. This led to dismal margins. Notably, the gross margin contracted 220 basis points (bps), including $80 million (700 bps) of increase in freight costs.
Abercrombie expects the fiscal 2022 gross margin to decline 200 bps due to freight and raw material inflation of 300-400 bps in fiscal 2022, with freight expenses weighted in the first half and raw materials in the second half. For first-quarter fiscal 2022, the gross profit rate is envisioned to decline 400 bps year over year, considering the incremental adverse impacts of about $65 million of freight cost pressure. The company anticipates operating expenses, excluding other operating income, to increase 6%.
Stocks to Consider
Here are three better-ranked stocks to consider — Nordstrom JWN, Tapestry TPR and Target TGT.
Nordstrom presently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 13.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Nordstrom’s current financial-year sales and EPS suggests growth of 5.7% and 180%, respectively, from the year-ago period’s reported numbers. JWN has an expected EPS growth rate of 6% for three-five years.
Tapestry presently has a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 28.2%, on average.
The Zacks Consensus Estimate for Tapestry’s current financial-year sales and EPS suggests growth of 17.5% and 22.9%, respectively, from the year-ago period’s reported numbers. TPR has an expected EPS growth rate of 12.5% for three-five years.
Target currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 21.3%, on average.
The Zacks Consensus Estimate for Target’s current financial-year sales and EPS suggests growth of 3.5% and 6.7%, respectively, from the year-ago period’s reported figures. TGT has an expected EPS growth rate of 16.5% for three-five years.
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