ANF Abercrombie and Fitch Co

The apparel retailer, Abercrombie & Fitch Co. (ANF) shares soared 11% in Tuesday’s session as the company provided an optimistic fiscal 2011 outlook in an analyst meeting.  The teen retailer expects to earn $4.75 a share for the fiscal year ending in January 2012 as per the Wall Street Cheat Sheet.

Abercrombie also revealed that it expects to achieve the annual sales goal of $7.5 billion in the fiscal year ending in 2015. Sales from both U.S and overseas stores will contribute to the goal.

The company mentioned that Hollister stores in Europe have continued to deliver strong sales and it plans to further add 40 new Hollister stores in international locations. The retailer is also planning to open 10 Abercrombie & Fitch stores abroad this year and another 10 next year. It is set to open one at Paris' Champs-Elysees next month.

The company also hinted that it also expects to achieve higher operating margins in fiscal 2011 from higher productivity in its U.S operations coupled with international expansion.

Abercrombie is one of the leading specialty retailers of premium casual apparels in the U.S. The company has a strong portfolio of well-established brands, each of which is focused on the unique characteristics and rapidly changing preferences of its target customers.

In an effort to improve cash flow and enhance management focus toward core brands, the company has terminated its entire chain of underperforming RUEHL branded stores and associated direct-to-consumer operations. This is expected to increase its long-term profitability.

Abercrombie has consistently outperformed rivals such as American Eagle Outfitters (AEO) and Aeropostale, Inc. (ARO) in terms of sales gains in the past year, as shoppers have moved back up to more expensive clothing. However, the company operates in a highly fragmented market and competes with national as well as regional players. Furthermore, apart from competing with larger retailers, Abercrombie is facing increasing competition from value-priced specialty retailers.

Abercrombie holds a Zacks #3 Rank, which translates into a short-term Hold recommendation. The long term recommendation on the stock is Neutral.

 
AMER EAGLE OUTF (AEO): Free Stock Analysis Report
 
ABERCROMBIE (ANF): Free Stock Analysis Report
 
AEROPOSTALE INC (ARO): Free Stock Analysis Report
 
Zacks Investment Research