Why are analysts upbeat?
Analysts are upbeat on Abercrombie & Fitch’s (ANF) American Eagle Outfitters’ (AEO), Urban Outfitters’ (URBN), and Gap’s (GPS) top lines. Apparel retailers’ top lines have improved as their investments in their digital sales channels and merchandise assortments are starting to pay off.
Analysts expect Abercrombie & Fitch’s (ANF) sales to grow 2.2% to $3.6 billion in fiscal 2018. Its Hollister and Abercrombie & Fitch brand sales, international operations, and D2C (direct-to-customer) sales are expected to remain primary growth catalysts. Abercrombie & Fitch has guided for sales growth of 2%–4% in fiscal 2018. Foreign exchange is estimated to add $50 million to sales, whereas the loss of a 53rd week this year is expected to dent sales by $40 million.
For American Eagle Outfitters, analysts expect revenue growth of 4.6% to $4.0 billion in fiscal 2018. Its American Eagle brand and intimate apparel brand, Aerie, are expected to be the company’s main growth catalysts. The company is confident that Aerie could exceed $1.0 billion in revenue. Its focus on bralettes and hiring plus-sized models have been well received by clientele.
For Urban Outfitters (URBN), sales are expected to increase 8.3% to $3.9 billion in fiscal 2019.[1.ending January 31, 2019] Rapidly growing digital operations and strength across all brands, namely Free People, Anthropologie, and Urban Outfitters, are expected to drive sales. Gap’s (GPS) sales are expected to grow 4.4% to $16.6 billion in fiscal 2018, driven by ongoing digital investments and cost cuts.
A quick recap of first-quarter numbers
In the first quarter, Abercrombie & Fitch’s sales rose 11% YoY (year-over-year) to $730.9 million, beating analysts’ estimate by 5.1%. American Eagle Outfitters’ revenue rose 8.0% YoY to $823.0 million, beating analysts’ estimate by 1.6%.
Meanwhile, Urban Outfitters’ sales rose 12.4% YoY to $855.7 million, beating analysts’ estimate by 2.1%, and Gap’s sales rose ~10% YoY to $3.8 billion, beating analysts’ estimate by 4.8%.