Why Abercrombie & Fitch Stock Plunged Today
Shares of apparel retailer Abercrombie & Fitch (NYSE: ANF) plunged on Wednesday after it reported financial results for the fourth quarter of 2024. As of noon ET, Abercrombie stock was down 14% for the day and down nearly 60% from its 52-week high.
Abercrombie just reported full-year net sales of $4.95 billion, which was up 16% year over year and hit a company record. Moreover, the company's full-year operating margin of 15% was its best showing in more than a decade. Therefore, it's surprising the stock is down nearly 60% from highs with numbers like these.
Investors are negatively reacting not to the 2024 numbers, but rather to Abercrombie's guidance for 2025. Net sales in 2025 are only expected to increase by 3% to 5% compared to 2024. And its operating margin is expected to drop to 14%-15%, accounting for some uncertainty regarding trade tariffs.
Coming off of a record year, investors don't want to see Abercrombie's margins take a step back or see its growth rate fall. And that's why the stock plunged today.
Generally speaking, I'm not a big fan of apparel stocks because fashion trends change and a durable competitive advantage is hard to establish. That said, I can't help but think that investors are being short-sighted with Abercrombie & Fitch stock today.
After all, Abercrombie does expect growth in the coming year. And even if its operating margin pulls back to 14%, that's nothing to sneeze at.
Moreover, Abercrombie's resurgent popularity has put it in a strong financial position, a position that it's using to reward shareholders. In fact, management just approved a new $1.3 billion stock buyback program and it expects to use $400 million of it in 2025. At the current stock price, this could reduce its outstanding share count by 10% in a single year, which is almost unheard of.
Investors may be selling Abercrombie stock today. But management doesn't appear as though it will let the cheap stock price go to waste.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why Abercrombie & Fitch Stock Plunged Today was originally published by The Motley Fool
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