Shares of apparel retailer Abercrombie & Fitch (ANF +1.22%) 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.
What sent investors running today?
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.
NYSE: ANF
Key Data Points
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.
Are investors overreacting?
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.
