Equity Research

Consumer | Specialty Retail

January 6, 2025 Dylan Carden +1 312 801 7857

[email protected]

Abercrombie & Fitch Co.

Anna Linscott +1 312 551 4651
[email protected]

ICR 2025 Preview: Breaking out of the Wedge Stock Rating: Market Perform

Shares of Abercrombie have been trading in an increasingly narrow range around $150 going Symbol: ANF (NYSE)
Price: $158.92 (52-Wk.: $90-$197)
back to summer 2024. This is despite continued upside to expectations drawn by outsized Market Value (M): $8,005
comp performance at the company’s namesake brand and clear acceleration at the Hollister Dividend/Yield: $0.00/0.00%
and International segments more recently. Taking a lesson from recent trading in other Fiscal Year End: January
companies we cover that saw similar spikes in performance that we categorize as outside 2024E 2025E 2026E
normal ranges, we are cautious that strong numbers likely to be reported around ICR could Estimates
fail to result in corresponding sustained upside for shares. This is owing to the larger, more EPS Q1 $2.14 $1.89 $1.72
impactful question for shareholders: how does the company comp over the last two years? Q2 $2.50 $2.52 $2.36
The company will update fourth-quarter and full year 2024 guidance at ICR but is unlikely to Q3 $2.50 $2.59 $2.39
Q4 $3.41 $3.37 $3.12
give much by way of tangible handholds around 2025 until it reports its full numbers in early FY $10.54 $10.37 $9.59
March. Sales (M) FY $4,924.7 $5,171.1 $5,282.1
Valuation
In this report, we update our current thinking on fourth-quarter trends and more meaningfully FY P/E 15.1x 15.3x 16.6x
explore the potential path of sales and margin growth looking out to 2026. Our sense is that
Trading Data (FactSet)
sales estimates for the back half of 2025 and full year 2026 are optimistic given stacked Shares Outstanding (M): 50.4
comparisons—and again taking cue from recent corrections at companies like Revolve (RVLV Float (M): 49.5
$31.47; Outperform) and Aritzia (ATZ-TSE $59.08; Outperform). From this, we see the largest Avg. Daily Volume (90-day): 1,835,399
risk to shares being margin giveback on faster-than-expected top-line deceleration, where the
Financial Data (FactSet)
Street is straight-lining 15% operating margin over the next two years. Companies that have Book Value Per Share (MRQ): $24.76
seen reversal in sales against harder comparisons have lost anywhere from 300 to 900 basis Return on Equity (TTM): 50.9%
points in margin in the subsequent two years. Enterprise Value (M): $7,575

It is worth noting that the Street seems to be almost as equally hopeful and fearful of Two-Year Price Performance Chart
Abercrombie’s prospects from here in breaking out of its wedge pattern (there is no $250

discernable upward or downward trend in trading). Over a longer horizon, we believe that $200

better inventory management with a clearer, more engaged messaging campaign across both
$150

$100

brands can likely sustain longer-term positive comp, juiced by a return to store growth with $50

a more productive new store model. Following any greater transparency on the likely path $0
Jan-24 Jan-25

of earnings on normalizing top-line trends, we see opportunity to become more positive on

the name. Even on a lower-margin profile, we anticipate close to $3 billion in free cash flow Sources: FactSet, William Blair & Company estimates

likely to be generated over the next five years, much of which we believe could be returned
to shareholders. For now, at 12.8 times 2026 Street EPS expectations, we view downward
earnings revisions as a larger, more immediate risk to shares at a valuation level that is more-
or-less appropriate, in our view, implying a new range for shares of between $120 and $140
depending on the severity of the margin giveback.

Abercrombie & Fitch Co. is a specialty retailer that operates stores and e-commerce both domestically and abroad,
encompassing a portfolio of brands including Abercrombie & Fitch, Abercrombie kids, Hollister, Gilly Hicks, and
Social Tourist.

Please refer to important disclosures on pages 9 – 10. Analyst certification is on page 9.

William Blair or an affiliate does and seeks to do business with companies covered in its research reports. As a
result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of
this report. This report is not intended to provide personal investment advice. The opinions and recommendations
herein do not take into account individual client circumstances, objectives, or needs and are not intended as
recommendations of particular securities, financial instruments, or strategies to particular clients. The recipient of
this report must make its own independent decisions regarding any securities or financial instruments mentioned
herein.
 William Blair

Abercrombie will most likely update fourth-quarter and full-year sales and margin guidance on the Monday morning of ICR,
ahead of its presentation set for later the same day. For the fourth quarter, the Street forecasts revenue growth of 7.4%, above
management’s guidance range of between 5% and 7% growth, anticipating upside to numbers that has been relatively
consistent over the last two years. Note, fourth-quarter guidance assumes an $80 million headwind (or 550 basis points) from
the calendar shift and loss of the extra week compared to 2023, while we still expect the Street to be more focused on comp
(which will not be impacted). Adjusting for the lost week and estimated foreign-currency headwind of 100 basis points,
management expects revenue growth in the range of 11% to 13%. For the quarter trends, online search interest, credit card,
and traffic remain strong for both brands, even despite tougher year-over-year comparisons. Moreover, the company attained
all-time high search interest (over a five-year time frame) during the weeks of Black Friday and Cyber Monday, which we
covered in a separate report, here.

Abercrombie & Fitch Co. 4Q24 Estimates and Year-Over-Year Comparison

Pre-release estimates Delta vs. Guidance Range 4Q23 Consensus
William Blair Consensus Consensus Low Midpoint High Actual vs. '23 Actual
Total sales 1,561 1,561 (0%) 1,526 1,540 1,555 1,453 7%
Comp 10.9% 9.7% 123 - - - 16.0% (633)
Gross profit 982 984 (0%) - - - 914 8%
Gross margin 62.9% 63.0% (13) - - - 62.9% 13
-
Operating expenses 732 730 0% - - - 691 6%
% sales 46.9% 46.8% 11 - - - 47.6% (89)
Operating income 250 254 (1%) - 246 - 223 14%
Operating margin 16.0% 16.2% (24) - 16.0% - 15.3% 91
Earnings per share $3.41 $3.52 (3%) - - - $2.97 19%
Adjusted EBITDA 302 295 2% - - - 269 10%
% sales 19.3% 18.9% 41 - - - 18.5% 40
Source: Company reports, FactSet, William Blair Equity Research

Abercrombie & Fitch Google Trends Index & Historical Dollar Sales (USD MM) Hollister & Co. Google Trends Index & Historical Dollar Sales (USD MM)
900 50 800 45

800 45 40
700
40
700 35
600
35
600 30
500
30
500 25
25 400
400 20
20
300
300 15
15
200
200 10
10

100 100 5
5

- - - -

A&F Sales Google Trends (right) Hollister Sales Google Trends (right)

Note: Current quarter estimate based on consensus estimate Note: Current quarter estimate based on consensus estimate
Source: Google trends, FactSet, company reports, William Blair Equity Research Source: Google trends, FactSet, company reports, William Blair Equity Research

On margins, management expects operating margin in the fourth quarter to land around 16% (versus the Street’s 16.2%
expectation) primarily due to expense leverage, while gross margin is expected to be consistent with the fourth quarter last
year as higher freight costs and foreign currency offset lower promotions. From a promotional stance, the A&F brand’s
promotional activity could be described as in line with last year throughout the weeks of Black Friday and Cyber Monday,
while the brand did appear to be slightly more promotional in December. However, Hollister has been less promotional on a
year-over-year basis throughout the quarter, in line with management commentary that there may be opportunity to reduce
promotions in the fourth quarter based on inventory levels and product acceptance.

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 William Blair

Deeper analysis of comp deceleration, profitability, and valuation

Abercrombie shares are trading at a relatively undemanding 12.8 times initial 2026 EPS consensus estimates. For a company
that we expect to comp in the low single digits, with modest store growth over the next two years against a strong brand and
customer engagement model, this valuation is relatively appropriate, in our view, and we believe it reflects potential volatility
in sales and therefore margin over the next two years. Our issue remains that the Street is straight-lining 15% operating
margins over 2025 and 2026 as comp decelerates to 3%, all of which we believe seems ambitious coming off more recent
outsized growth and in the context of what other companies have experienced in recent years. We expect that operating
margin has more giveback as comp decelerates further and potentially faster, in turn threatening outyear EPS expectations, all
else equal. We believe the risk around sustainability of current top-line trends and operating margin is what has held shares in
a relative stable and narrowing range going back to July 2024, with our assessment of fair value in the $120-$140 range,
effectively holding current multiples against a lower, albeit still healthy, operating margin profile out to 2026.

To be sure, there is likely juice left in the tank here, with upside clearly to fourth-quarter and full-year comp numbers and
strong momentum that carries into the early part of 2025. Hollister and the European business can likely continue to make up
ground, offsetting a clear deceleration at the A&F brand as it rolls over increasingly harder comparisons. The risk we envision
in the business is a continuation of the deceleration of the A&F brand that will reverse out arguably outsized leverage in the
model when comps were in the low- to high-20% range for five quarters straight through second quarter 2024. As
expectations stand now, we see the most downside risk to sales estimates starting in the back half of 2025, where Street
numbers currently imply a notable acceleration in total company stacked trends. We believe the glide path of expected sales is
also ambitious when compared to other like companies that have come off recent outsized runs, most notably Revolve and
Aritzia. The comparisons here are not entirely elegant. For one, both Revolve and Aritzia saw comp spikes much earlier in the
cycle (late 2021 and early 2022, respectively), which likely had some COVID recovery embedded in it (though in picking our
starting points we tried to avoid that). Having also spiked more, their respective decelerations are likely more severe compared
to what we believe is in store for Abercrombie. We nevertheless believe the slope of any coming deceleration for Abercrombie
could put comp below the 3.4% level the Street is anticipating by the time you get into 2026, which underpins earnings used
for valuation.
January year end 2017 - 2019
ANF-US 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 2Q25 3Q25 4Q25 1Q26 2Q26 3Q26 4Q26 CAGR
Sales 813 805 880 1,200 836 935 1,056 1,453 1,021 1,134 1,209 1,561 1,090 1,208 1,274 1,642 1,138 1,261 1,342 1,768
3 yr CAGR 3.5% (1.4%) 0.6% 0.4% 19.9% 10.2% 8.8% 9.0% 9.3% 9.5% 10.1% 10.4% 10.3% 14.5% 13.1% 11.0% 10.8% 10.5% 8.3% 6.8%
4 yr CAGR 2.7% (1.1%) 0.5% 0.9% 3.3% 2.7% 5.2% 5.2% 20.4% 12.9% 10.2% 8.6% 8.7% 8.7% 8.9% 9.0% 8.8% 11.9% 11.1% 10.2%
5yr CAGR 4.2% 0.7% 0.5% 0.1% 2.7% 2.1% 4.2% 4.7% 6.8% 6.2% 7.0% 5.7% 17.6% 11.6% 9.2% 7.9% 7.8% 7.8% 8.2% 8.8%
6yr CAGR 2.9% 0.5% 1.1% 2.5% 4.0% 3.1% 3.5% 3.3% 5.7% 5.1% 5.8% 5.1% 6.8% 6.2% 6.7% 5.6% 15.3% 10.4% 8.6% 7.9%
Expected annualized sales growth 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 1.8%
Note: Red shaded areas indicate comping over 2020 pandemic era
Source: Company reports, FactSet, William Blair Equity Research

Comparable Outsized Comp Runs (in Quarters)

50%

40%

30%

20%

10%

0%

(10%)
1 2 3 4 5 6 7 8 9 10 11 12 13

ANF ULTA RVLV ATZ

Note: Comp run beginning quarter: RVLV (Sep '21), ULTA (Oct '21), ATZ (May '22), ANF (Jul '23). Dotted line represents ANF consensus estimates
Source: Company reports, William Blair Equity Research

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 William Blair

Abercrombie total company sales have grown above 15% for the last two years (assuming upside to current full year 2024
guidance range of 14%-15%). Gross margin has improved 770 basis points to a mid-65% level last achieved in the early 2000s.
We think the company can mostly hold gross margin, owing to a more flexible inventory model and on-trend offering,
particularly with Hollister still in something of a recovery. It is below this line where we see potential issue. SG&A costs have
risen over 10% in the last two years, or within 500 basis points of sales growth, on roughly 1% square-footage growth. We
estimate that this implies fixed operating costs (which include rent and store labor) in the 35% range.

The best hope from here is that as comp decelerates management can hold operating cost growth in line, to be able to maintain
current margin by still leveraging stable fixed costs. Using an index of sales and mapping future growth and costs to current
consensus suggests capacity to even improve margin at a stable fixed to variable cost ratio of 35:65.

Abercrombie Theoretical Margin Analysis

Consensus
2022 2023 2024E 2025E 2026E
Sales index 100 116 133 143 147
YoY 16% 15% 7% 3%
GI 57 73 86 91 94
GM 57% 63% 65% 64% 64%
BPS 600 170 (100) -
Op costs 54 60 66 69 71
YoY 10% 11% 5% 2%
EBIT 3 13 20 21 23
Margin 2.8% 11.4% 14.9% 15.1% 15.6%
Note: 2025-2026 op costs represent 35% fixed cost assumption
Source: William Blair Equity Research

A harder situation would be comps decelerating faster than the company can react on costs given mismatched lead time. Here
we do not believe the Street is anticipating something as severe as a sub-2% or even negative comp at the A&F brand, which
again, when looking at other brands that reported outsized comp in recent years, seems to warrant higher probability than
most are inclined to give it. Assuming a less controlled deceleration, Abercrombie operating cost growth has outpaced revenue
growth in periods of deceleration, and our assumption on effectively flat fixed cost growth in the above analysis likely
understates total cost growth as the company returns to growing square footage in the coming years.

Year-over-Year Growth Comparison

25%

20%

15%

10%

5%

0%

(5%)

(10%)

(15%)

(20%)
2016 2017 2018 2019 2020 2021 2022

Sales Sq ft Op costs

Source: Company reports, William Blair Equity Research

We acknowledge that the above analysis is likely overly theoretical and draws from a period of intense volatility. And yet, at
risk of oversimplifying, it is from this same volatility and lessons from it where we draw our deeper sense of the risk presented
by shares at the current moment. In the last four years, we have seen several examples of companies that have had outsized

4 | Dylan Carden +1 312 801 7857

 William Blair

growth and margin gains only to reverse out within a couple years. This includes Boot Barn (BOOT $161.51; Outperform),
National Vision (EYE $11.14; Outperform), Ulta (ULTA $430.88; Market Perform), Revolve, and Aritzia. Note that the operating
margin correction for these companies was in the range of 300-550 basis points lost over two years at the low end (Ulta and
Boot Barn, respectively) to 800 to 900 basis points (National Vision, Aritzia, and Revolve) at the high end. Our concerns around
Abercrombie stem mostly from simply the more recent history of how our coverage has weathered volatility.

The misread of our analysis would be that the more recent success Abercrombie has had is based on factors outside the
company’s control. Instead, we give much credit to inventory and brand repositioning initiatives that the company has spent
nearly a decade implementing. To us, this implies a much more successful, profitable, and eventually stable business looking
further out, with strong cash flow dynamics that support value even at slower growth. We estimate the company can generate
over $3 billion in free cash flow over the next five years, assuming sub-1% square-footage growth (note that new stores are
smaller), 2% comp and getting back to what we see as a more sustainable operating margin in the 11%-13% range. We believe
the company could return much of this to shareholders, which could be a considerable windfall in the context of current
market capitalization of $8 billion. For now, our view is that numbers and margin in particular have to shake out to be able to
better value the company, noting that fundamentals should trump shareholder returns in the more immediate to intermediate
term, being the largest risk for shares. We believe low- to midsingle-digit PE valuation on a low- to midsingle-digit top-line
profile, at healthy margin and shareholder returns, imply a fair value around a $120 to $140 level. While higher shareholder
returns could juice the multiple, inherent risk in the retail space likely weighs on it in near equal measure, in our view.

5 | Dylan Carden +1 312 801 7857

 William Blair

Abercrombie & Fitch Co.

Quarterly and Annual Statement of Income

US$ MM FYE FYE FYE Q1 Q2 Q3 Q4 FYE Q1 Q2 Q3 Q4E FYE Q1E Q2E Q3E Q4E FYE FYE
Fiscal year end January 2020 2021 2022 Apr-23 Jul-23 Oct-23 Jan-24 2023 May-24 Aug-24 Oct-24 Jan-25 2024E May-25 Aug-25 Oct-25 Jan-26 2025E 2026E
Net sales 3,125.4 3,712.8 3,697.8 836.0 935.3 1,056.4 1,452.9 4,280.7 1,020.7 1,134.0 1,209.0 1,561.1 4,924.7 1,088.0 1,209.4 1,254.9 1,618.8 5,171.1 5,282.1
Y/Y % (13.7%) 18.8% (0.4%) 2.9% 16.2% 20.0% 21.1% 15.8% 22.1% 21.2% 14.4% 7.4% 15.0% 6.6% 6.7% 3.8% 3.7% 5.0% 2.1%
Y/Y comparable sales change 3.0% 13.0% 16.0% 16.0% 13.0% 21.0% 18.0% 16.0% 10.9% 15.6% 6.0% 6.0% 3.4% 3.4% 4.5% 2.0%

Cost of sales 1,234.2 1,400.8 1,593.2 326.2 351.0 370.8 539.3 1,587.3 343.3 397.7 422.0 579.5 1,742.5 364.8 423.0 434.9 596.9 1,819.6 1,858.6
Gross profit 1,891.2 2,312.0 2,104.5 509.8 584.4 685.7 913.6 2,693.4 677.5 736.3 786.9 981.6 3,182.2 723.2 786.5 820.0 1,021.9 3,351.5 3,423.5
Gross margin 60.5% 62.3% 56.9% 61.0% 62.5% 64.9% 62.9% 62.9% 66.4% 64.9% 65.1% 62.9% 64.6% 66.5% 65.0% 65.3% 63.1% 64.8% 64.8%
Y/Y bps 114 176 (536) 567 461 573 718 601 539 245 19 0 170 10 10 25 25 20 0

Stores and distribution expense 1,379.9 1,428.3 1,482.9 336.0 352.7 383.9 499.1 1,567.3 371.7 390.2 419.2 536.5 1,717.7 397.7 417.5 440.2 574.1 1,829.5 1,921.0
Y/Y % (14.0%) 3.5% 3.8% (0.4%) 3.5% 4.5% 14.1% 5.7% 10.6% 10.6% 9.2% 7.5% 9.6% 7.0% 7.0% 5.0% 7.0% 6.5% 5.0%
% sales 44.2% 38.5% 40.1% 40.2% 37.7% 36.3% 34.4% 36.6% 36.4% 34.4% 34.7% 34.4% 34.9% 36.6% 34.5% 35.1% 35.5% 35.4% 36.4%
Y/Y bps (14) (568) 163 (133) (462) (540) (209) (349) (378) (330) (166) 2 (174) 14 11 40 110 50 99

Marketing, general and administrative expense 463.8 536.8 517.6 142.6 144.5 162.5 193.2 642.9 177.9 170.5 190.0 195.2 733.5 186.8 179.0 199.5 208.8 774.1 812.8
Y/Y % (0.2%) 15.7% (3.6%) 16.8% 16.4% 22.0% 39.9% 24.2% 24.7% 18.0% 16.9% 1.0% 14.1% 5.0% 5.0% 5.0% 7.0% 5.5% 5.0%
% sales 14.8% 14.5% 14.0% 17.1% 15.4% 15.4% 13.3% 15.0% 17.4% 15.0% 15.7% 12.5% 14.9% 17.2% 14.8% 15.9% 12.9% 15.0% 15.4%
Y/Y bps 202 (38) (46) 203 3 25 179 102 37 (42) 33 (80) (12) (26) (23) 18 40 8 42

Total operating expenses 1,843.8 1,965.1 2,000.5 478.7 497.2 546.4 692.3 2,210.2 549.6 560.7 609.2 731.7 2,451.2 584.5 596.5 639.7 782.9 2,603.6 2,733.8
Y/Y % (10.9%) 6.6% 1.8% 4.1% 6.9% 9.2% 20.3% 10.5% 14.8% 12.8% 11.5% 5.7% 10.9% 6.4% 6.4% 5.0% 7.0% 6.2% 5.0%
% sales 59.0% 52.9% 54.1% 57.3% 53.2% 51.7% 47.6% 51.6% 53.8% 49.4% 50.4% 46.9% 49.8% 53.7% 49.3% 51.0% 48.4% 50.3% 51.8%
Y/Y bps 187 (607) 117 70 (459) (515) (30) (247) (342) (371) (133) (78) (186) (12) (12) 58 149 58 141

Other operating income, net (5.1) (8.3) (0.5) (2.9) (2.7) 1.3 (1.5) (5.9) (2.0) (0.1) (1.6) - (3.6) (2.0) (0.1) (1.6) - (3.6) (3.6)

Operating income 52.5 355.2 104.5 34.0 89.8 138.0 222.8 489.1 129.8 175.6 179.3 249.9 734.7 140.6 190.0 181.9 239.0 751.5 693.3
Operating margin 1.7% 9.6% 2.8% 4.1% 9.6% 13.1% 15.3% 11.4% 12.7% 15.5% 14.8% 16.0% 14.9% 12.9% 15.7% 14.5% 14.8% 14.5% 13.1%
Y/Y bps (61) 789 (674) 484 988 1,065 769 860 865 588 176 67 349 21 22 (34) (124) (38) (141)

Interest income / (expense) (28.3) (34.1) (25.6) (3.4) (1.1) (0.7) 4.8 (0.4) 5.0 5.2 8.7 8.7 27.7 8.7 8.7 8.7 8.7 34.9 34.9
Income (loss) before income taxes 24.2 321.1 78.9 30.6 88.7 137.3 227.6 488.7 134.9 180.8 188.0 258.6 762.4 149.4 198.7 190.6 247.7 786.5 728.3

Income tax expense (benefit) 64.5 41.6 59.8 12.7 30.0 39.6 66.5 150.1 19.8 45.4 54.2 75.6 195.0 47.8 63.6 51.5 66.9 229.8 212.8
Income tax rate 266.6% 12.9% 75.8% 41.6% 33.8% 28.8% 29.2% 30.7% 14.7% 25.1% 28.8% 29.2% 25.6% 32.0% 32.0% 27.0% 27.0% 29.2% 29.2%

Less: net income attributable to non-controlling interest 5.1 7.1 7.6 1.3 1.8 1.5 2.7 7.3 1.2 2.2 1.9 2.7 8.0 1.8 2.0 2.0 2.6 8.4 8.6
Net income (loss) from continuing operations (45.4) 272.5 11.5 16.6 56.9 96.2 158.4 331.4 113.9 133.2 132.0 180.4 559.4 99.8 133.2 137.1 178.2 548.3 507.0
Non-recurring items 68.6 9.4 (3.4) - - - - - - - - - - - - - - - -
Full diluted shares outstanding 62.6 62.6 50.8 51.5 51.5 52.6 53.4 52.7 53.3 53.3 52.9 52.9 53.1 52.9 52.9 52.9 52.9 52.9 52.9

Operating earnings per share ($0.73) $4.35 $0.23 $0.32 $1.10 $1.83 $2.97 $6.28 $2.14 $2.50 $2.50 $3.41 $10.54 $1.89 $2.52 $2.59 $3.37 $10.37 $9.59
Y/Y % (199.2%) (699.6%) (94.8%) (220.1%) (430.7%) 16231.0% 264.2% 2679.9% 563.7% 126.5% 36.5% 15.0% 67.7% (11.7%) 0.8% 3.9% (1.2%) (1.6%) (7.5%)
Reported earnings per share ($1.82) $4.20 $0.29 $0.32 $1.10 $1.83 $2.97 $6.28 $2.14 $2.50 $2.50 $3.41 $10.54 $1.89 $2.52 $2.59 $3.37 $10.37 $9.59
Y/Y % (404.5%) (330.4%) (93.0%) (201.8%) (464.5%) (4186.4%) 227.3% 2045.0% 563.7% 126.5% 36.5% 15.0% 67.7% (11.7%) 0.8% 3.9% (1.2%) (1.6%) (7.5%)

Sources: Company reports, William Blair Equity Research

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 William Blair
Abercrombie & Fitch Co.
Quarterly and Annual Balance Sheet

US$ MM FYE FYE FYE Q1 Q2 Q3 Q4 FYE Q1 Q2 Q3 Q4E FYE Q1E Q2E Q3E Q4E FYE FYE
Fiscal year end January 2020 2021 2022 Apr-23 Jul-23 Oct-23 Jan-24 2023 May-24 Aug-24 Oct-24 Jan-25 2024E May-25 Aug-25 Oct-25 Jan-26 2025E 2026E
Assets
Cash and cash equivalents 1,104.9 823.1 517.6 447.0 617.3 649.5 900.9 900.9 864.2 738.4 683.1 967.5 967.5 1,138.9 1,205.9 1,375.8 1,587.6 1,587.6 2,204.2
Marketable Securities - - - - - - - - - - - - - - - - - - -
Receivables 83.9 69.1 104.5 106.1 112.6 96.8 78.3 78.3 93.6 115.1 111.6 84.2 84.2 99.8 122.7 115.8 87.3 87.3 89.1
Inventories 404.1 525.9 505.6 447.8 493.5 595.1 469.5 469.5 449.3 539.8 692.6 478.9 478.9 453.8 545.2 699.5 483.6 483.6 488.5
Deferred Income Taxes - - - - - - - - - - - - - - - - - - -
Other current assets 68.9 89.7 100.3 107.7 87.9 100.1 88.6 88.6 102.5 123.4 168.5 95.2 95.2 109.3 131.6 174.9 98.7 98.7 100.7
Total current assets 1,661.6 1,507.8 1,228.0 1,108.6 1,311.3 1,441.4 1,537.3 1,537.3 1,509.6 1,516.7 1,655.8 1,625.7 1,625.7 1,801.7 2,005.4 2,366.0 2,257.2 2,257.2 2,882.5

Property and equipment, net 550.6 508.3 551.6 550.8 553.7 546.9 538.0 538.0 540.7 552.5 570.4 566.0 566.0 557.7 545.4 529.5 510.8 510.8 410.6
Operating lease right-of-use assets 894.0 698.2 723.6 692.7 715.0 682.6 678.3 678.3 699.5 746.8 798.3 798.3 798.3 798.3 798.3 798.3 798.3 798.3 798.3
Marketable Securities - - - - - - - - - - - - - - - - - - -
Other assets 208.7 225.2 209.9 206.0 216.8 226.7 220.7 220.7 220.3 233.7 245.4 245.4 245.4 245.4 245.4 245.4 245.4 245.4 245.4
Total assets 3,314.9 2,939.5 2,713.1 2,558.1 2,796.7 2,897.6 2,974.2 2,974.2 2,970.1 3,049.6 3,269.9 3,235.4 3,235.4 3,403.1 3,594.5 3,939.2 3,811.7 3,811.7 4,336.8

Liabilities and stockholders' equity

Accounts payable 289.4 374.8 258.9 221.6 323.2 373.9 297.0 297.0 266.9 406.8 466.3 254.6 254.6 344.7 371.8 528.0 214.4 214.4 172.9
Outstanding Checks - - - - - - - - - - - - - - - - - - -
Accrued expenses 396.4 395.8 413.3 340.3 375.5 402.6 436.7 436.7 402.8 422.5 469.1 461.5 461.5 428.4 449.5 492.6 493.8 493.8 518.5
Short-term portion of borrowings - - - - - - - - - - - - - - - - - - -
Short-term operating lease liabilities 248.8 222.8 214.0 188.5 191.7 195.0 179.6 179.6 188.9 202.8 210.3 210.3 210.3 210.3 210.3 210.3 210.3 210.3 210.3
Deferred Lease Credits - - - - - - - - - - - - - - - - - - -
Income taxes payable 24.8 21.8 16.0 19.0 46.0 55.6 53.6 53.6 61.1 19.6 36.3 36.3 36.3 36.3 36.3 36.3 36.3 36.3 36.3
Total current liabilities 959.4 1,015.2 902.2 769.5 936.5 1,027.1 966.8 966.8 919.7 1,051.7 1,182.1 962.7 962.7 1,019.7 1,067.9 1,267.3 954.9 954.9 938.1

Deferred Income Taxes - - - - - - - - - - - - - - - - - - -

Long-term operating lease liabilities 957.6 697.3 713.4 683.0 692.0 658.9 646.6 646.6 656.9 688.0 734.9 734.9 734.9 734.9 734.9 734.9 734.9 734.9 734.9
Deferred Lease Credits - - - - - - - - - - - - - - - - - - -
Long-term borrowings 343.9 303.6 296.9 297.2 297.4 248.0 222.1 222.1 213.1 - - - - - - - - - -
Leasehold financing obligations - - - - - - - - - - - - - - - - - - -
Other liabilities 104.7 86.1 94.1 97.5 92.0 87.4 88.7 88.7 89.3 88.7 92.4 95.3 95.3 95.1 94.7 95.9 98.8 98.8 100.9
Gift Card Acrued Liabilities - - - - - - - - - - - - - - - - - - -
Total non-current liabilities 1,406.2 1,086.9 1,104.3 1,077.6 1,081.5 994.4 957.4 957.4 959.2 776.8 827.3 830.2 830.2 830.0 829.6 830.8 833.7 833.7 835.8

Total stockholders' equity 949.3 837.3 706.6 711.0 778.8 876.1 1,050.0 1,050.0 1,091.2 1,221.2 1,260.5 1,442.6 1,442.6 1,553.4 1,697.0 1,841.1 2,023.1 2,023.1 2,562.9
Total liabilities and stockholders' equity 3,314.9 2,939.5 2,713.1 2,558.1 2,796.7 2,897.6 2,974.2 2,974.2 2,970.1 3,049.6 3,269.9 3,235.4 3,235.4 3,403.1 3,594.5 3,939.2 3,811.7 3,811.7 4,336.8

Sources: Company reports, William Blair Equity Research

7 | Dylan Carden +1 312 801 7857

 William Blair
Abercrombie & Fitch Co.
Quarterly and Annual Cash Flow Statement

US$ MM FYE FYE FYE Q1 Q2 Q3 Q4 FYE Q1 Q2 Q3 Q4E FYE Q1E Q2E Q3E Q4E FYE FYE
Fiscal year end January 2020 2021 2022 Apr-23 Jul-23 Oct-23 Jan-24 2023 May-24 Aug-24 Oct-24 Jan-25 2024E May-25 Aug-25 Oct-25 Jan-26 2025E 2026E
Net income (109.0) 270.1 10.4 17.8 58.7 97.7 161.1 335.4 115.1 135.4 133.9 180.4 564.7 99.8 133.2 137.1 178.2 548.3 507.0
Depreciation and amortization 166.3 144.0 132.2 36.0 36.4 33.1 35.6 141.1 37.7 39.4 39.6 42.4 159.0 46.3 50.3 53.8 56.7 207.1 252.1
Amortization of deferred lease credits - - - - - - - - - - - - - - - - - - -
Non-cash portion of operating lease expense - - - - - - - - - - - - - - - - - - -
Share-based compensation 18.7 29.3 29.0 8.1 11.6 9.7 10.8 40.1 11.4 9.2 9.5 9.5 39.7 9.5 9.5 9.5 9.5 38.1 38.1
Tax Benefit from Share-Based Compensation - - - - - - - - - - - - - - - - - - -
Excess Tax Benefit of Stock-Based Compensation - - - - - - - - - - - - - - - - - - -
Deferred tax benefit / (expense) 24.0 (31.9) 11.5 9.7 (10.5) (12.8) 8.9 (4.7) 3.1 (7.9) (5.0) - (9.9) - - - - - -
Gain / (loss) of assets and charges for impairment 89.3 22.5 14.5 4.9 1.1 4.8 5.8 16.7 1.8 3.0 5.9 - 10.8 - - - - - -
Lessor Construction Allowances - - - - - - - - - - - - - - - - - - -
Foreign Currency Gains - - - - - - - - - - - - - - - - - - -

Changes in Working Capital

Inventories 33.3 (123.2) 18.5 57.7 (45.8) (103.7) 126.9 35.0 19.9 (89.9) (152.9) 213.7 (9.2) 25.1 (91.4) (154.4) 215.9 (4.8) (4.8)
Accounts payable & accrued expenses 186.7 77.9 (115.2) (100.8) 141.8 85.9 (43.9) 82.9 (65.7) 151.7 98.6 (219.4) (34.8) 57.0 48.2 199.4 (312.4) (7.8) (16.8)
Operating lease assets and liabilities (55.7) (93.8) (18.5) (26.2) (10.1) 5.3 (24.7) (55.6) (1.7) (3.5) 3.0 - (2.2) - - - - - -
Income taxes 10.8 (3.1) (7.4) 3.0 25.3 9.6 (2.1) 35.8 7.6 (43.7) 16.7 - (19.4) - - - - - -
Other assets and liabilities 40.5 (13.9) (77.5) (10.8) 8.4 4.2 25.0 26.7 (34.1) (28.5) (6.6) 97.9 28.6 (29.5) (44.8) (37.6) 101.9 (10.1) (5.9)
Cash flow from operations 404.9 277.8 (2.3) (0.6) 216.9 133.8 303.3 653.4 95.0 165.1 142.6 324.5 727.2 208.2 104.9 207.8 249.8 770.8 769.6

Purchases of property and equipment (101.9) (97.0) (164.6) (46.4) (43.4) (38.8) (29.2) (157.8) (38.9) (42.8) (50.4) (38.0) (170.0) (38.0) (38.0) (38.0) (38.0) (151.8) (151.8)
Proceeds from the sale of property and equipment - - 11.9 - - 0.6 - 0.6 - - - - - - - - - - -
Purchases of Trust Owned Life Insurance Policies - - - - - - - - - - - - - - - - - - -
Purchase of Marketable Securities - - - - - - - - - - - - - - - - - - -
Proceeds from Sales of Marketable Securities - - - - - - - - - - - - - - - - - - -
Other 50.0 - 12.0 - - - - - - (15.0) (40.0) - (55.0) - - - - - -
Cash flow from investing (51.9) (97.0) (140.7) (46.4) (43.4) (38.2) (29.2) (157.2) (38.9) (57.8) (90.4) (38.0) (225.0) (38.0) (38.0) (38.0) (38.0) (151.8) (151.8)

Dividends paid (12.6) - - - - - - - - - - - - - - - - - -

Change in Outstanding Checks and Other - - - - - - - - - - - - - - - - - - -
Proceeds from Share-Based Comp - - - - - - - - - - - - - - - - - - -
Excess Tax Benefit from Share-Based Comp - - - - - - - - - - - - - - - - - - -
Proceeds / (repayment) under credit agreement - - - - - - - - - - - - - - - - - - -
Issuance of Common Stock - - - - - - - - - - - - - - - - - - -
Proceeds from issuance of senior secured notes 350.0 - (7.9) - - (50.9) (27.0) (78.0) (9.4) 9.4 (223.3) - (223.3) - - - - - -
Repayment of term loan facility borrowings (233.3) (47.0) - - - - - - - - - - - - - - - - -
Payment of debt issurance costs and fees (7.3) (2.0) (0.2) - - - (0.2) (0.2) - (2.7) (0.6) - (3.3) - - - - - -
Other financing activities (12.0) (20.6) (21.5) (22.0) (1.4) (12.8) 3.1 (33.0) (68.5) (225.7) 218.1 - (76.2) - - - - - -
Purchases of common stock (15.2) (377.3) (125.8) - (0.0) 0.0 - - (15.0) (15.0) (99.8) - (129.8) - - - - - -
Cash flow from financing 69.7 (446.9) (155.3) (22.0) (1.4) (63.8) (24.1) (111.2) (93.0) (234.0) (105.6) - (432.6) - - - - - -

Effect of foreign current exchange rates on cash 9.2 (23.7) (8.5) (2.0) (1.7) (0.8) 1.6 (2.9) (0.9) 1.0 (1.9) - (1.8) - - - - - -

Net increase / (decrease) in cash 431.9 (289.8) (306.8) (70.9) 170.4 31.0 251.6 382.1 (37.7) (125.7) (55.3) 286.5 67.8 170.2 67.0 169.9 211.9 618.9 617.8
Cash and cash equivalents, beginning of period 692.3 1,124.2 823.1 516.3 445.4 615.9 646.9 517.6 899.7 862.0 736.3 681.0 900.9 968.7 1,138.9 1,205.9 1,375.8 967.5 1,587.6
Cash and cash equiavalents, end of period 1,124.2 834.4 516.3 445.4 615.9 646.9 898.5 899.7 862.0 736.3 681.0 967.5 968.7 1,138.9 1,205.9 1,375.8 1,587.6 1,586.5 2,205.4
Free cash flow 303.0 180.8 (166.9) (47.0) 173.5 95.0 274.1 495.6 56.1 122.3 92.2 286.5 557.2 170.2 67.0 169.9 211.9 618.9 617.8

Sources: Company reports, William Blair Equity Research

8 | Dylan Carden +1 312 801 7857

 William Blair

IMPORTANT DISCLOSURES

William Blair or an affiliate is a market maker in the security of Abercrombie & Fitch Co..

William Blair or an affiliate expects to receive or intends to seek compensation for investment banking services from Abercrombie & Fitch Co.
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DOW JONES: 42732.10

S&P 500: 5942.47
NASDAQ: 19621.70

Abercrombie & Fitch Co. Rating History as of 01/03/2025

powered by: BlueMatrix
200

150

100

50

0
Apr 22 Jul 22 Oct 22 Jan 23 Apr 23 Jul 23 Oct 23 Jan 24 Apr 24 Jul 24 Oct 24 Jan 25

Closing Price

OP:Outperform Mkt:Market Perform UP:Under Perform NR:Not Rated I:Initiation of Coverage D:Dropped Coverage

Source: FactSet & William Blair

Additional information is available upon request.

Current Rating Distribution (as of January 6, 2025):

Coverage Universe Percent Inv. Banking Relationships * Percent

Outperform (Buy) 71 Outperform (Buy) 9

Market Perform (Hold) 28 Market Perform (Hold) 1
Underperform (Sell) 1 Underperform (Sell) 0
*Percentage of companies in each rating category that are investment banking clients, defined as companies for which William Blair has
received compensation for investment banking services within the past 12 months.

The compensation of the research analyst is based on a variety of factors, including performance of his or her stock recommendations;
contributions to all of the firm’s departments, including asset management, corporate finance, institutional sales, and retail brokerage; firm
profitability; and competitive factors.

9 | Dylan Carden +1 312 801 7857

 William Blair

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10 | Dylan Carden +1 312 801 7857

Equity Research Directory
John Kreger, Partner Director of Research +1 312 364 8612 Scott Hansen Associate Director of Research +1 212 245 6526
Kyle Harris, CFA, Partner Operations Manager +1 312 364 8230

CONSUMER Healthcare Technology and Services

Sharon Zack�ia, CFA, Partner +1 312 364 5386 Ryan S. Daniels, CFA, Partner +1 312 364 8418
Group Head–Consumer Group Head–Healthcare Technology and Services
Lifestyle and Leisure Brands, Restaurants, Automotive/E-commerce Healthcare Technology, Healthcare Services
Jon Andersen, CFA, Partner +1 312 364 8697 Margaret Kaczor Andrew, CFA, Partner +1 312 364 8608
Consumer Products Medical Technology
Phillip Blee, CPA +1 312 801 7874 Brandon Vazquez, CFA +1 212 237 2776
Home and Outdoor, Automotive Parts and Services, Discount and Dental, Animal Health, Medical Technology
Convenience Life Sciences
Dylan Carden +1 312 801 7857 Matt Larew, Partner +1 312 801 7795
E-commerce, Specialty Retail Life Science Tools, Bioprocessing, Healthcare Delivery
Andrew F. Brackmann, CFA +1 312 364 8776
ECONOMICS
Diagnostics
Richard de Chazal, CFA +44 20 7868 4489
Max Smock, CFA +1 312 364 8336
ENERGY AND SUSTAINABILITY Pharmaceutical Outsourcing and Services
Jed Dorsheimer +1 617 235 7555
Group Head–Energy and Sustainability
INDUSTRIALS
Generation, Ef�iciency, Storage Brian Drab, CFA, Partner +1 312 364 8280
Co-Group Head–Industrials
Tim Mulrooney, Partner +1 312 364 8123
Advanced Manufacturing, Industrial Technology
Sustainability Services
Ryan Merkel, CFA , Partner +1 312 364 8603
FINANCIAL SERVICES AND TECHNOLOGY Co-Group Head–Industrials
Adam Klauber, CFA, Partner +1 312 364 8232 Building Products, Specialty Distribution
Group Head–Financial Services and Technology Louie DiPalma, CFA +1 312 364 5437
Financial Analytic Service Providers, Insurance Brokers, Property & Aerospace and Defense, Smart Cities
Casualty Insurance
Ross Sparenblek +1 312 364 8361
Andrew W. Jeffrey, CFA +1 415 796 6896 Diversi�ied Industrials, Robotics, and Automation
Fintech
Cristopher Kennedy, CFA +1 312 364 8596 TECHNOLOGY, MEDIA, AND COMMUNICATIONS
Fintech, Specialty Finance Jason Ader, CFA, Partner +1 617 235 7519
Jeff Schmitt +1 312 364 8106 Co-Group Head–Technology, Media, and Communications
Wealthtech, Wealth Management, Capital Markets Technology Infrastructure Software
Arjun Bhatia, Partner +1 312 364 5696
GLOBAL SERVICES Co-Group Head–Technology, Media, and Communications
Tim Mulrooney, Partner +1 312 364 8123 Software
Group Head–Global Services
Dylan Becker, CFA +1 312 364 8938
Commercial and Residential Services
Software
Andrew Nicholas, CPA +1 312 364 8689
Consulting, HR Technology, Information Services Louie DiPalma, CFA +1 312 364 5437
Government Technology
Trevor Romeo, CFA +1 312 801 7854
Staf�ing, Waste and Recycling Jonathan Ho, Partner +1 312 364 8276
Cybersecurity, Security Technology
HEALTHCARE Maggie Nolan, CPA, Partner +1 312 364 5090
Biotechnology IT Services
Matt Phipps, Ph.D., Partner +1 312 364 8602 Jake Roberge +1 312 364 8056
Group Head–Biotechnology Software
Sami Corwin, Ph.D. +1 312 801 7783 Ralph Schackart III, CFA, Partner +1 312 364 8753
Lachlan Hanbury-Brown +1 312 364 8125 Internet and Digital Media
Andy T. Hsieh, Ph.D., Partner +1 312 364 5051 Stephen Sheldon, CFA, CPA, Partner +1 312 364 5167
Myles R. Minter, Ph.D. +1 617 235 7534 Vertical Technology – Real Estate, Education, Restaurant/Hospitality

Sarah Schram, Ph.D. +1 312 364 5464 EDITORIAL AND SUPERVISORY ANALYSTS
Steve Goldsmith, Head Editor and SA +1 312 364 8540
Audrey Majors, Editor and SA +1 312 364 8992
Beth Pekol Porto, Editor and SA +1 312 364 8924
Lisa Zurcher, Editor and SA +44 20 7868 4549