Abercrombie & Fitch: A Must Have Stock - Barron's

Hugely successful clothing retailer Abercrombie & Fitch (ANF) has consistently managed to keep the pulse of youthful fashion, making Abercrombie's clothes 'must-have' for generation Y— even at a premium price. With cool store layouts and sexy, successful marketing, Abercrombie has achieved 67% margins. Despite aggressive pricing, customers just can't get enough. Fiscal 2007 earnings rose an impressive 13% to $5.20/share, despite the difficult retail environment. Even though Abercrombie predicts slower (5%-8%) sales in FH1'08, Barron's sees $6.90/share in earnings. Upside possibilities include phenomenal international sales, but which still only account for 3% of ANF's $3.75 billion sales annually; Abercrombie's Hollister chain offers greater profit potential with its lower-priced goods and younger target crowd; The Gilly Hicks lingerie line is already competing with giants like Limited Brands' (LTD) Victoria's Secret; and a personal care/perfume line rounds out the offerings.