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Abercrombie's Latest Buyback Plan to Boost Shareholder Value

Zacks Equity Research

Abercrombie & Fitch Co. ANF announced that its board of directors authorized a new share buyback program of about 5 million shares of Class A Common Stock. Following this, the company had roughly 7.6 million outstanding shares available for repurchase as of Jun 12. This represents more than 10% of its overall shares outstanding.

The recent share buyback program highlights the company’s efforts to drive shareholders’ value. Moreover, it returned about $13.2 million to shareholders through dividends in first-quarter fiscal 2019. At the end of the quarter, it had authorization worth nearly $3.6 million remaining under its current share repurchase plan.

Additionally, the company declared a quarterly dividend of 20 cents per share on the Class A shares, payable on Jun 17, 2019.

Meanwhile, Abercrombie has been making investments in loyalty programs, stores, and digital and omni-channel capabilities to aid growth. The company’s investments in mobile, omni-channel and fulfillment significantly aided growth of its digital business. Notably, digital engagement with consumers has been its core strength.

Impressively, digital business is performing quite well on robust momentum across its brands and geographies. Digital channel sales contributed 30% to revenues in the fiscal first quarter. Further, the company is progressing well with its goal of delivering integrated digital and in-store shopping experiences. Its ‘purchase online, pick up in store’ (POPinS) and ‘order in-store’ capabilities are delivering strong results.

Furthermore, this Zacks Rank #3 (Hold) company has been aggressively expanding Hollister stores in new markets. In fact, growth of this brand internationally is expected to enhance Abercrombie’s overall performance. The Hollister brand reflects persistent positive momentum, driven by strong sales growth across all channels and geographies in first-quarter fiscal 2019. Impressively, Hollister is gaining from the positive customer response to product innovations, emerging categories and overall customer experience.

Price Performance

However, shares of Abercrombie have lost 41.1% in the past three months, wider than the industry’s 21.5% decline. This downside can mainly be attributed to the company’s revised view for increased impact of foreign currency and higher operating expenses for fiscal 2019. Unfavorable foreign currency rate is now expected to mar top-line results by nearly $30 million, up from the previously mentioned impact of $15 million. Operating expenses, excluding other operating income, are now expected to increase nearly 4-5% year over year compared with a 2% increase stated earlier.

3 Better-Ranked Stocks in the Same Space

The Children's Place, Inc. PLCE, currently sporting a Zacks Rank #1 (Strong Buy), has an expected long-term earnings growth rate of 8%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stitch Fix, Inc. SFIX, which presently carries a Zacks Rank #2 (Buy), has an impressive long-term earnings growth rate of 22.5%.

Shoe Carnival, Inc. SCVL, also a Zacks Rank #2 stock, delivered average positive earnings surprise of 25.2% in the last four quarters.

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