Is Abercrombie & Fitch (NYSE:ANF) Stock in Strong Buy Territory?

Clothing retailer Abercrombie & Fitch (ANF) has been transformed from one of America’s most hated clothing brands into a cool and inclusive company. The firm’s improving brand image has elevated the stock, with shares up more than 700% in five years. I’m once again bullish on ANF stock with the share price and valuation moderating since the summer. I think management has an incredible opportunity to build on the brand’s momentum and enter new markets.

Abercrombie & Fitch’s Transformation

The Abercrombie & Fitch brand has undergone an impressive transformation, making me bullish on the stock. Abercrombie & Fitch has long been known for its preppy image. However, Abercrombie & Fitch has made remarkable progress in reviving its brand and expanding its market over the past few years. The company, once known for its controversial marketing and exclusivity, has successfully pivoted to a more inclusive and diverse image that resonates with a broader demographic and ethical consumers.

Under CEO Fran Horowitz’s leadership, Abercrombie & Fitch has focused on understanding and meeting customer needs, and this has proven to be an incredibly successful strategy. In 2023, the Abercrombie brand saw a 27% increase in sales. This has contributed to outstanding results. Revenue grew by more than 20% year-over-year in each of the last four quarters, and earnings have surged.

While the growth has been impressive, ANF stock has trended lower after the company’s last financial results included weak forward guidance. More recently, the company’s share price has been pushed lower after former CEO Michael Jeffries was charged in the U.S. with 16 federal counts of sex trafficking and international prostitution while he led the retailer. Jeffries left Abercrombie & Fitch a decade ago and has no current involvement with the brand. Nevertheless, news of the charges has pushed the stock down.

Abercrombie’s Expanding Market

Improved financial performance is another good reason to like ANF stock. In recent years, the company has expanded its target market to include 18 to 40 year old consumers, moving beyond its previous focus on teenagers. This shift has paid off, with JPMorgan Chase (JPM) analyst Matthew Boss recently noting that the company has done an “impressive job luring in a wider demographic.”

Abercrombie & Fitch’s Hollister brand — which offers a lower price point — is also showing promise, with Boss raising his same-store sales growth estimate to 9%, above the street’s estimate of 8%. The analyst sees this as the “early innings” of Hollister’s brand building, suggesting significant future growth.

Internationally, the company is also gaining momentum, with JPMorgan identifying a ~$400 million revenue recapture opportunity relative to pre-pandemic levels. This global expansion, particularly in key markets like the United Kingdom and Germany, is part of Abercrombie & Fitch’s strategic plan to push beyond $5 billion in revenue by 2025.

Abercrombie & Fitch’s Basis for Growth

Continued growth is one more reason to be bullish on ANF stock. The company’s transformation is not just about expanding its market but also about redefining its brand identity. Abercrombie & Fitch has embraced inclusivity and diversity in its marketing campaigns, featuring models of various backgrounds and body types. This shift towards authenticity and relatability has resonated strongly with Gen Z and millennial consumers, driving engagement and sales.

Along with sustainability initiatives, Abercrombie & Fitch appears to have a great basis for future growth, building a loyal following with environmentally conscious and inclusivity-aware consumers. Expanding into new product categories, such as home goods or accessories such as eyewear, could diversify revenue streams.

The company could also see tailwinds by entering emerging markets in Asia and South America. These fast-growing markets could see the company tap into new customers, while leveraging its brand momentum.

ANF Stock’s Improving Valuation

Abercrombie & Fitch’s stock is up 129% over the last 12 months, but it’s fallen considerably from its highs. The stock does display quite a lot of volatility and can be one of the fastest falling stocks when the U.S. market has a bad day. However, the general trend over the past three months has been downward.

The stock now trades at an attractive 13.6x forward earnings, putting it at a 19.4% discount to the consumer discretionary average. Although it’s worth noting that the stock still trades at a premium to competitors such as The Gap (GAP) and Urban Outfitters (URBN).

However, apparel brands trade heavily on brand strength and momentum. And, in my opinion, Abercrombie’s brand value is arguably stronger than the aforementioned companies. Abercrombie & Fitch’s expected earnings growth isn’t linear, however, and that may be due to an anomaly in the forecasting. Currently, the lowest forecast for 2026 and 2027 shows earnings falling significantly from 2025, which, in turn, appears to be pulling sentiment towards the stock lower.

Is Abercrombie & Fitch Stock a Buy?

On TipRanks, ANF stock has a Moderate Buy consensus rating based on five Buys, two Holds, and zero Sell recommendations assigned by analysts in the past three months. The average ANF stock price target of $186.43 implies 33.4% upside potential from current levels.

Read more analyst ratings on ANF stock

The Bottom Line on ANF Stock

Abercrombie & Fitch stock has outperformed almost all of its peers over the past 12 months, and almost certainly all peers over the past five years. However, the stock has shown some weakness in recent months and I think this provides investors with an opportunity. While the charges against former CEO Michael Jeffries are serious, and ANF stock trades at a premium to many of its peers, the company has great brand momentum and a loyal customer following. This represents an impressive turnaround from the position the company was in years ago. For these reasons, I’m bullish on ANF stock over the long-term.