Abercrombie and Fitch Executive Summary
Abercrombie & Fitch
Abercrombie & Fitch is a global fashion retailer selling casual wear apparel, fragrance and both luxury and relatively inexpensive products to teenagers and young adults. The company operates through three segments: U.S. Stores, International Stores, and Direct-to-Consumer, and has four brands targeting different groups of customers, flagship brand A&F, three other brands Hollister, Abercrombie kids, and Gilly
Hicks.
A&F and Hollister are two major brands, together accounting for more than 80% of the company’s total sales. The two brands were both in difficult situation since 2008, experienced nearly 15% decline and kept trying to back on track. However the international market gives hope to the company. As part of the recovering strategy, the company shuts down underperforming domestic stores and open new international stores. In 2013, total international revenue increased by 33.6%. Due to less expensive price and good design and quality, Hollister attracted more customers than A&F did, occupying 107 out of 139 total international stores, and became the new focus of the company.
Our price target for Abercrombie and Fitch is $32.57 after putting 50% weight in price from DCF model and 25% weight in each multiple model. This price is within the 52-week range and is slightly lower than the current price. It is slightly higher than the price we got from DCF model with 8% WACC and 1% perpetuity growth rate, which has the estimated share price $31.86. It is lower than the prices we got from P/E multiple and EBITDA multiple. In P/E Multiple, the P/E multiple we assume is 11.49x and the estimated share price is $32.75 In EBITDA
Multiple, we adjust the EBITDA multiple as 4.5 and the estimated share price is $33.82.
Xiyin Sun | Qiyang Tan | Linglong Wang | Yajie Wang | Jiayu Zhai | Yinsi Zhang
Recommendation:
Ticker(NYSE)
Price as of 12/11/2013
Target Price
Market Data
52-Week Range
Enterprise Value
Market Cap
Beta
Abercrombie & Fitch is a global fashion retailer selling casual wear apparel, fragrance and both luxury and relatively inexpensive products to teenagers and young adults. The company operates through three segments: U.S. Stores, International Stores, and Direct-to-Consumer, and has four brands targeting different groups of customers, flagship brand A&F, three other brands Hollister, Abercrombie kids, and Gilly
Hicks.
A&F and Hollister are two major brands, together accounting for more than 80% of the company’s total sales. The two brands were both in difficult situation since 2008, experienced nearly 15% decline and kept trying to back on track. However the international market gives hope to the company. As part of the recovering strategy, the company shuts down underperforming domestic stores and open new international stores. In 2013, total international revenue increased by 33.6%. Due to less expensive price and good design and quality, Hollister attracted more customers than A&F did, occupying 107 out of 139 total international stores, and became the new focus of the company.
Our price target for Abercrombie and Fitch is $32.57 after putting 50% weight in price from DCF model and 25% weight in each multiple model. This price is within the 52-week range and is slightly lower than the current price. It is slightly higher than the price we got from DCF model with 8% WACC and 1% perpetuity growth rate, which has the estimated share price $31.86. It is lower than the prices we got from P/E multiple and EBITDA multiple. In P/E Multiple, the P/E multiple we assume is 11.49x and the estimated share price is $32.75 In EBITDA
Multiple, we adjust the EBITDA multiple as 4.5 and the estimated share price is $33.82.
Xiyin Sun | Qiyang Tan | Linglong Wang | Yajie Wang | Jiayu Zhai | Yinsi Zhang
Recommendation:
Ticker(NYSE)
Price as of 12/11/2013
Target Price
Market Data
52-Week Range
Enterprise Value
Market Cap
Beta