Former US presidents Theodore Roosevelt, Dwight D. Eisenhower and John F. Kennedy have something in common: they wore Abercrombie clothing. In contrast, the current ruler in the White House, Joe Biden, is no longer part of the target group of the traditional clothing retailer. Today, the company focuses on children and the millennial generation. Abercrombie & Fitch is courting this target group worldwide with four brands: In addition to Abercrombie & Fitch, these include Abercrombie Kids, Hollister and Gilly Hicks Active. The Group operates a total of 750 stores in North America, Europe, Asia and the Middle East. The various collections can also be purchased online. Business is booming: Abercrombie & Fitch increased sales by 16% to USD 4.3 billion in 2023. With an operating result of just under USD 0.5 billion, the fashion house generated a double-digit percentage margin.
The upturn continued in the first three months of 2024. Abercrombie & Fitch increased sales by more than a fifth year-on-year to USD 1.0 billion - more than ever before in an opening quarter. The operating margin shot up by 860 basis points to 12.7%. According to the company, all labels and regions contributed to growth. The core brand Abercrombie stood out with a 31% increase in sales. "Following a strong performance in the first quarter, we are raising our full-year guidance for sales and operating margin," explained CEO Fran Horowitz. He now expects revenue to grow by around a tenth. The company had previously forecast an increase of between 4% and 6%. The CEO raised the target for the operating margin by 2 percentage points to around 14%. "We will continue to make strategic investments in stores, digital and technology to strengthen the company and pursue our long-term ambitions," he announced.
In addition to new collections, the management is focusing on digital customer acquisition with the help of influencers and social media. The managers are also taking a technological approach to customer analysis and store openings. New locations are selected with the help of extensive data analysis. Abercrombie & Fitch has recently been using the power of McLaren to drive global awareness. At the beginning of February, an official partnership with the Formula 1 racing team was announced in a store on New York's Fifth Avenue. The first T-shirts, hoodies and sweaters in the look of the fast-paced sport and the legendary team were sold last year. In keeping with this, Abercrombie & Fitch has increased its share price considerably: Over a 12-month period, the shares, which have been listed in New York since 1996, are up more than 400%.
Even in the event that the second-line stock goes out of fashion again, an attractive return would be possible with a soft callable barrier reverse convertible. Leonteq is issuing two variants of this popular structure based on Abercrombie & Fitch. In the product currency CHF, the guaranteed coupon is 14.88% p.a. The USD-denominated counterpart even yields a quarterly distribution of 19.18%. Irrespective of the value date, the barrier is fixed at 55% of the initial level. As long as the fashion share does not fall to or below this level, the issuer will repay the nominal value in full on the maturity date. If, on the other hand, the barrier is breached, the partial protection expires. In this case, the investment would be exposed to the full price risk of Abercrombie & Fitch. Please also note: Due to the soft callable function, early termination and redemption of this issue is possible.
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