ANF Stock Forecast & Price Target

Abercrombie & Fitch Company is projected to experience operational margin expansion, reaching 13% in 2026 and further improving to 14.0%, facilitated by gross margin recovery from tariff offsets and a reduction in markdowns, coupled with leveraged selling, general, and administrative expenses due to stronger revenue growth. The inventory management appears robust, with a 10% increase in total inventory at the end of Q2, reflecting a careful alignment with ongoing sales trends, as evidenced by a 7% unit increase in line with a 7% sales growth in Q2 and an anticipated 5%-7% growth for Q3. Additionally, Hollister, which accounts for 48% of sales in 2024, is benefiting from effective merchandising and marketing strategies that have gained momentum over the past year, further enhancing confidence in the company's financial outlook.

Abercrombie & Fitch's stock faces significant challenges, primarily due to a notable slowdown in comparable store sales growth, decreasing from over 20% in prior quarters to just 5% in Q4'24. Additionally, the company has experienced substantial reductions in its physical retail footprint, with store count declining by 8% and square footage decreasing by over 20% compared to pre-COVID levels in 2019. These factors contribute to a negative outlook as the shares appear to be adjusting to anticipated downward earnings revisions while remaining below group averages.