ANF

We rate ABERCROMBIE & FITCH CO /DE/ (ANF) as a Hold with a composite score of 58.6/100 at a current price of $94.97. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in quality (77th percentile) and value (74th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (30th percentile) and stability (38th percentile) tempers our overall conviction. We assign a Narrow Moat rating (51/100), High uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

ABERCROMBIE & FITCH CO /DE/ holds a lower-quartile position (#43 of 50) within the Retail Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 58.6/100 places it at rank #825 in our full 7,333-stock universe. At $3.4B in market capitalization, ABERCROMBIE & FITCH CO /DE/ is a mid-cap player in the Retail Trade space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 14%, though momentum at the 58th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 63% (+26.9pp vs sector) narrow to operating margins of 13% (+9.4pp vs sector) and net margins of 9.8%, yielding a gross-to-net conversion rate of 16%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $94.97, ABERCROMBIE & FITCH CO /DE/ appears undervalued relative to its fundamentals. Our value factor score of 74/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 9.3x (a 56% discount to the sector median of 21.4x), EV/EBITDA of 5.5x (discounted to peers), P/B of 3.3x, P/S of 0.9x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a High uncertainty rating to ABERCROMBIE & FITCH CO /DE/. Key risk factors include elevated market sensitivity (beta of 1.36), significant leverage (161% debt-to-equity), below-average price stability (38th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.36); significant leverage (161% debt-to-equity); below-average price stability (38th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 38th percentile and quality factor at the 77th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 63% provide a buffer against cost pressures. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate ABERCROMBIE & FITCH CO /DE/'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 35.6%, and the balance sheet is managed within acceptable parameters (D/E: 161%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; ABERCROMBIE & FITCH CO /DE/ falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, ABERCROMBIE & FITCH CO /DE/ receives a Hold rating with a composite score of 58.6/100 (rank #825 of 7,333). Our quantitative framework assigns a Narrow Moat (51/100, trend: stable), High uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 55/100.

Our analysis supports a neutral stance on ABERCROMBIE & FITCH CO /DE/. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.