Abercrombie & Fitch Brand Has More Resilient Customer Base Than Peers: Analyst

Telsey Advisory Group analyst Dana Telsey reiterated an Outperform rating on the shares of Abercrombie & Fitch Co ANF with a price target of $35.
ANF reported 1Q23 EPS of $0.39 versus $(0.27) last year, coming ahead of the consensus. Total sales increased 2.9% for the quarter, topping the consensus estimate for 0.3% growth and the guidance of roughly flat.
The bottom-line upside was driven by across-the-board outperformance, as sales, gross margin, and operating expenses as a percent of sales all came in better than expected, said the analyst.
The gross margin expansion for the quarter was driven by a 760 basis points benefit from lower freight costs and 230 basis points from AUR growth, added the analyst.
The analyst noted that the company also raised its annual outlook on the strength of the first-quarter results and a better-than-expected second-quarter guide.
Encouragingly, the analyst added that with the first half outperformance, the FY23 guide appears less back-end weighted than many retail peers.
The A&F brand remains healthy with a more resilient customer base and strong assortment, while Hollister can continue to improve as the year progresses with cleaner inventories.
Longer-term, the analyst continues to see margin expansion opportunity through digital growth and increased square footage productivity.
Price Action: ANF shares are trading higher by 26.1% at $29.01 on the last check Wednesday.

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