Dj Abercrombie & Fitch's Namesake Brand To Offset Hollister Gains - Market Talk

Abercrombie & Fitch's namesake brand performance will likely offset expected gains from its Hollister brand, Raymond James analysts say in a research note. The namesake brand of the apparel retailer is showing slower demand signals post the ICR Conference in mid January, the analysts say, with promotions up year-over year. Meanwhile, the analysts are seeing the opposite at Hollister as it benefits from demand acceleration for the late fourth quarter and the first quarter to date, the analysts add. Raymond James cuts its FY25 EPS estimates to $11.49 a share from $11.85 a share previously, and its revenue growth views to 6.2% from 7.6%. Raymond James also lowers its target price to $124 a share from $165 a share. (sabela.ojea@wsj.com; @sabelaojeaguix)

The Gap, Inc. GAP is expected to register top and bottom-line declines when it reports fourth-quarter fiscal 2024 results on March 6, after the closing bell.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

The Zacks Consensus Estimate for fiscal fourth-quarter earnings is pegged at 36 cents per share, suggesting a 26.5% decline from the year-ago quarter’s reported figure. The consensus estimate for fiscal fourth-quarter earnings has been unchanged in the past 30 days. For revenues, the consensus mark is pegged at $4.1 billion, indicating a 5.4% rise from the year-ago quarter’s reported figure.

The San Francisco, CA-based company has been reporting steady earnings outcomes, as evident from its positive top and bottom-line surprise trends in the trailing four quarters. In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 28.6%. GAP has a trailing four-quarter earnings surprise of 101.2%, on average. Given its positive record, the question is whether the stock can maintain its momentum.

Earnings Whispers for GAP

Our proven model conclusively predicts an earnings beat for Gap this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Gap currently has an Earnings ESP of +11.55% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

What to Expect From GAP’s Q4 Earnings: Key Trends

GAP’s fourth-quarter fiscal 2024 results are expected to reflect its ability to gain market share and revive its brand position. Management has been committed to creating a trend-right merchandise assortment, deepening relations with customers via marketing, enhancing the digital commerce agenda and efficiently controlling expenses. Gains from these actions are expected to have bolstered the company’s performance in fourth-quarter fiscal 2024.

Fueled by optimism around its holiday collection, Gap raised its fiscal 2024 outlook. In the fourth quarter of fiscal 2024, the company prioritized enhanced experiences for online and in-store shoppers by refreshing product imagery on its website and remodeling 15% of its stores. Gap was committed to executing with excellence in the fiscal fourth quarter.

Strong performances in the fiscal third quarter and the early fourth quarter positioned the company well for the holiday season. This has bolstered its confidence to raise its fiscal 2024 outlook for sales, gross margin and operating income growth. As a result, management forecast sales growth of 1.5-2% on a 52-week basis for fiscal 2024, implying fourth-quarter net sales growth of 1-2%.

The company’s fourth-quarter fiscal 2024 performance is expected to have gained from improved margins, driven by lower airfreight and increased promotional activity. Lower advertising expenses and technology investments from cost-saving actions bode well. The company has been aggressively undertaking cost-management actions, which are expected to have improved its performance in the to-be-reported quarter.

The Gap, Inc. Price and EPS Surprise

The Gap, Inc. price-eps-surprise | The Gap, Inc. Quote

On the last reported quarter’s earnings call, Gap anticipated the gross margin to expand at least 220 basis points (bps) year over year for fiscal 2024, including 100 bps of commodity cost gains realized in the first half of the fiscal year. This improvement was driven by commodity cost tailwinds in the first half of fiscal 2024, improved inventory management and relatively neutral ROD. In fourth-quarter fiscal 2024, the gross margin is expected to have been consistent with last year. Operating income for fiscal 2024 is projected to increase year over year in the mid-to-high 60%. This represents substantial progress toward restoring historical operating profit levels.

We expect the adjusted gross margin to expand 210 basis points for fiscal 2024. Our model projects adjusted operating income to surge 69.1% year over year in fiscal 2024, with an operating margin of 6.8%. Our model predicts year-over-year adjusted operating expenses to decline 7.1% for the fourth quarter and 1.1% in fiscal 2024.

Gap has been navigating an uncertain macroeconomic environment, including inflationary pressures and other challenges, which are expected to have impacted its top-line performance in the to-be-reported quarter. A decline in consumer confidence — a key economic indicator — could have further affected spending. Rising operating and SG&A expenses may put pressure on the company’s profitability for the fiscal fourth quarter.

Gap’s Price Performance & Valuation Look Promising

The company’s shares have exhibited an uptrend in the past year, rising 17.7%, leaving behind its industry peers and the S&P 500. In the past year, the apparel retailer’s shares have jumped 17.7%, outperforming the industry’s growth of 4.9% and the S&P 500’s rally of 17.1%. Meanwhile, the stock has underperformed the sector’s rise of 24% in the same period.

The Gap stock has displayed a significant rally compared with Deckers Outdoor DECK, American Eagle Outfitters Inc. AEO and Abercrombie & Fitch’s ANF declines of 9.7%, 45.7% and 25%, respectively, in the past year.

GAP's One-Year Price Performance

Abercrombie & Fitch Co. ANF is scheduled to report fourth-quarter fiscal 2024 results on March 5, before the opening bell.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

The Zacks Consensus Estimate for ANF’s fiscal fourth-quarter revenues is pegged at $1.56 billion, suggesting 7.6% growth from that reported in the year-ago quarter. For fiscal fourth-quarter earnings, the consensus mark is pegged at $3.49 per share, implying a 17.5% increase from the $2.97 reported in the year-ago quarter. The consensus estimate for earnings has edged down by a penny in the past seven days.

In the last reported quarter, Abercrombie's earnings beat the consensus estimate by 7.8%. Moreover, ANF has delivered an earnings surprise of 14.8%, on average, in the trailing four quarters.

Earnings Whispers for ANF

Our proven model conclusively predicts an earnings beat for Abercrombie this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Abercrombie currently has an Earnings ESP of +0.59% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Trends Leading Up to ANF’s Q4 Results

ANF has been gaining from continued momentum in the Abercrombie brand, improvement in the Hollister brand and store-optimization efforts. The company has noted that its efforts to improve the positioning of the Hollister brand have been paying off. Investments across stores, digital and technology via its Always Forward Plan bode well.

In January 2025, Abercrombie provided a positive business update, thanks to a robust performance in the holiday season. The company noted that its fiscal fourth-quarter through holiday season performance was ahead of management’s expectations issued in November.

Net sales growth for the period was driven by comparable sales (comps) across regions and brands in the holiday selling period. This is backed by the positive response to its exciting product assortments and engaging marketing.

Driven by a stellar holiday performance, management hiked the sales view for the fourth quarter and fiscal 2024 while reiterating the outlook for the other metrics. Robust customer-driven brands, relevant brand playbooks, major global growth opportunities leveraging capabilities in owned and operated channels, and a solid omnichannel base, coupled with a healthy balance sheet and a consistent free cash flow, are likely to boost growth.

Abercrombie & Fitch Company Price and EPS Surprise

Abercrombie & Fitch Company price-eps-surprise | Abercrombie & Fitch Company Quote

Management expects net sales growth of 7-8% for the fiscal fourth quarter. The operating margin for the fiscal fourth quarter is projected to be 16%. This guidance does not include the impacts of 550 basis points from the 53rd week and about 50 basis points from foreign currency. The company retained its operating margin view of 16% and the effective tax rate guidance in the high 20s for the fourth quarter of fiscal 2024.

For fiscal 2024, Abercrombie anticipates net sales growth of 15% compared with the previously mentioned 14-15%. Management expects an operating margin of 15% and an effective tax rate in the mid-20s for fiscal 2024. The sales outlook excludes the impacts of 120 basis points from the 53rd week.

Our model predicts fourth-quarter fiscal 2024 total revenues to increase 7.4% year over year. We expect sales for the Abercrombie brand to grow 6.6%. Sales for Hollister are expected to improve 8.2%.

However, Abercrombie has been witnessing elevated operating costs on higher technology expenses and incentive-based compensation. Additionally, inflation and increased investment for the 2025 Always Forward Plan initiatives are likely to have been concerning in the to-be-reported quarter. Our model estimates a year-over-year increase of 6% in adjusted operating expenses for the fiscal fourth quarter.

ANF’s Price Performance & Valuation

Abercrombie’s shares have exhibited a decline in the past year, underperforming its industry peers and the Zacks Retail-Wholesale sector. In the past year, the New Albany, OH-based company’s shares have declined 25% against the industry and the sector’s growth of 4.9% and 23.9%, respectively. The company has also lagged the S&P 500’s rally of 17.1%.

ANF’s One-Year Price Performance

The Gap, Inc. GAP is expected to register top and bottom-line decline when it reports fourth-quarter fiscal 2024 results on March 6, after the closing bell. For revenues, the Zacks Consensus Estimate is pegged at $4.07 billion, indicating a 5.4% drop from the year-ago quarter’s figure.

The consensus estimate for the bottom line is pegged at 36 cents per share, indicating a 26.5% decline from the year-ago quarter’s figure. The consensus estimate for fourth-quarter fiscal earnings has been stable in the past 30 days.

The San Francisco, CA-based company has been reporting steady earnings outcomes, as evident from its bottom and top-line surprise trends in the trailing four quarters. GAP has a trailing four-quarter earnings surprise of 101.2%, on average. In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 28.6%.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Factors Likely to Impact Gap’s Q4 Results

Gap’s quarterly results are likely to reflect the adverse impacts of a volatile macroeconomic landscape, including inflationary pressures and other headwinds. Soft spending patterns on evolving consumer preferences and adverse foreign currency translations are likely to have been other deterrents. The company has been witnessing soft store sales for a while now. We anticipate store and franchise sales to decline 12.7% year over year.

In addition, tough comparisons and weather-related headwinds are likely to hurt results. These factors, coupled with any deleverage in operating and other expenses, are expected to hurt the company’s top and bottom-line results. We expect total revenues to decrease 3.1% year over year at Gap, 6% at Old Navy, 6.2% at Banana Republic and 6.5% at Athleta.

On the flip side, Gap has been smoothly progressing on the reinvigoration of its brands. Management has been committed to creating a trend-right merchandise assortment, deepening relations with customers via marketing, enhancing the digital commerce agenda and efficiently controlling expenses. Gains from these actions are expected to have somewhat offered a cushion to the company’s performance.

On its last reported quarter’s earnings call, management had anticipated the gross margin to be similar year over year for the fourth quarter of fiscal 2024. This excludes roughly one percentage point of deleveraged ROD from soft sales in the quarter, owing to the absence of the 53rd week.

What the Zacks Model Unveils for GAP

Our proven model predicts an earnings beat for Gap this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

Gap currently has an Earnings ESP of +11.55% and a Zacks Rank of 2.

The Gap, Inc. Price and EPS Surprise

The Gap, Inc. price-eps-surprise | The Gap, Inc. Quote

Valuation Picture of GAP Stock

Gap stock is trading at an attractive valuation relative to the industry. Going by the price/earnings ratio, the stock is currently trading at 10.44 on a forward 12-month basis, lower than 18.32 of the industry. Also, it is trading lower than its median of 14.15.

The recent market movements show that Gap’s shares have lost 0.6% in the past six months against the industry's 3.3% growth.

Other Stocks With the Favorable Combination

Here are three more companies, which according to our model, have the right combination of elements to post an earnings beat this season:

Abercrombie & Fitch ANF currently has an Earnings ESP of +0.59% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company is likely to register growth in its top and bottom lines when it reports fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for quarterly revenues is pegged at $1.6 billion, which indicates an increase of 7.6% from the figure reported in the prior-year quarter.

The consensus estimate for ANF’s earnings per share is pegged at $3.49, indicating an increase of 17.5% from the year-ago quarter’s figure. The consensus mark for earnings has moved down 0.6% in the past seven days. ANF has delivered a trailing four-quarter earnings surprise of 14.8%, on average.

Ulta Beauty, Inc. ULTA has an Earnings ESP of +1.62% and a Zacks Rank of 2 at present. ULTA is likely to register a decline in its top and bottom lines when it reports fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $3.5 billion, which indicates a 2.6% drop from the figure reported in the year-ago quarter.

The consensus estimate for Ulta Beauty’s fourth-quarter earnings is pegged at $7.06 per share, indicating a 12.6% decline from the figure in the year-ago quarter. The consensus mark for earnings has moved down a penny in the past 30 days. ULTA has delivered an earnings beat of 6.2%, on average, in the trailing four quarters.

DICK'S Sporting Goods, Inc. DKS currently has an Earnings ESP of +0.98% and a Zacks Rank of 2. DKS is expected to report a decline in its top and bottom lines when it reports fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $3.75 billion, which indicates a 3.3% decrease from the figure in the year-ago quarter.

The consensus estimate for DICK'S fiscal fourth-quarter earnings is pegged at $3.47 per share, down 9.9% from the year-ago quarter. The consensus mark for earnings has moved up 0.6% in the past 30 days. DKS has delivered a trailing four-quarter earnings surprise of 11.4%, on average.

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research

As Burlington Stores, Inc. BURL readies to announce its fourth-quarter fiscal 2024 earnings, investors are closely watching for insights into the company's performance amid a challenging retail landscape. The earnings report, scheduled for release on March 6 before the opening bell, is expected to provide critical indicators of how Burlington Stores has navigated recent economic shifts.

The company is anticipated to show a notable increase in its top line. The Zacks Consensus Estimate for revenues is currently pegged at $3.28 billion, implying a 5% rise from the prior year's reported figure. This potential growth reflects Burlington's ability to maintain momentum despite a tough operational environment.

Burlington Stores is also expected to deliver strong bottom-line growth. The Zacks Consensus Estimate for fourth-quarter earnings per share has risen by a couple of cents to $3.76 over the past seven days, indicating an increase from $3.66 reported in the same quarter last year. This suggests that the off-price retailer, known for offering high-quality branded apparel at everyday low prices, continues to enhance its profitability.

Burlington Stores has a trailing four-quarter earnings surprise of 18.8%, on average. In the last reported quarter, this Burlington, NJ-based company outperformed the Zacks Consensus Estimate by 0.7%.

See the Zacks Earnings Calendar to stay ahead of market-making news.

Burlington Stores, Inc. Price, Consensus and EPS Surprise

Burlington Stores, Inc. price-consensus-eps-surprise-chart | Burlington Stores, Inc. Quote

The Dynamics Behind Burlington’s Q4 Earnings

At a time when consumers continue to prioritize affordability, Burlington Stores’ off-price model resonates strongly. By offering brand-name products at discounted prices, the company successfully attracts a diverse customer base, fostering repeat purchases and enhancing customer retention.

Burlington Stores’ ability to adapt to evolving consumer preferences provides a distinct competitive edge. The company’s aggressive expansion strategy, including store openings in high-traffic markets and relocations from slower growth areas, is broadening its reach and allowing it to tap into new demographics. The ability to quickly adjust inventory levels based on real-time data insights has enabled the company to seize opportunities. This approach not only drives foot traffic but also improves store productivity.

With the fourth quarter aligning with the holiday shopping season, Burlington Stores is poised to have benefited from heightened consumer spending. Its curated mix of seasonal apparel, home goods and essentials, combined with a strong emphasis on value pricing and on-trend merchandise, is expected to have driven higher store traffic and conversion rates. We expect comparable store sales to increase 1.4% during the fourth quarter.

What the Zacks Model Predicts for BURL

As investors prepare for Burlington Stores' fourth-quarter announcement, the question looms regarding earnings beat or miss. Our proven model does not conclusively predict an earnings beat for Burlington Stores this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. However, that is not the case here.

Burlington Stores currently carries a Zacks Rank #3 but has an Earnings ESP of -0.69%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

3 Stocks With the Favorable Combination

Here are three companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Costco Wholesale Corporation COST currently has an Earnings ESP of +0.14% and a Zacks Rank #2. The Zacks Consensus Estimate for second-quarter fiscal 2025 earnings per share is pegged at $4.09, suggesting 10.2% year-over-year growth. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco’s top line is expected to ascend year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $63.2 billion, which indicates an increase of 8.2% from the figure reported in the prior-year quarter. COST has a trailing four-quarter earnings surprise of 2%, on average.

American Eagle Outfitters AEO currently has an Earnings ESP of +2.29% and carries a Zacks Rank #3. The company is likely to register a bottom-line decrease when it reports fourth-quarter fiscal 2024 numbers. The Zacks Consensus Estimate for the quarterly earnings per share of 50 cents suggests a decline from 61 cents reported in the year-ago quarter.

American Eagle Outfitters’ top line is expected to advance year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $1.61 billion, which indicates a decrease of 4.3% from the figure reported in the prior-year quarter. American Eagle Outfitters has a trailing four-quarter earnings surprise of 12.6%, on average.

Abercrombie & Fitch Co. ANF currently has an Earnings ESP of +0.59% and a Zacks Rank of 3. The company is likely to register an increase in the bottom line when it reports fourth-quarter fiscal 2024 numbers. The Zacks Consensus Estimate for quarterly earnings per share of $3.49 suggests a rise of 17.5% from the year-ago reported number.

Abercrombie & Fitch’s top line is expected to ascend year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $1.56 billion, which suggests an increase of 7.6% from the prior-year quarter. ANF has a trailing four-quarter earnings surprise of 14.8%, on average.

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research