Abercrombie, Hollister Shirt for Women, Hollister Hoodies

Abercrombie & Fitch (ANF) is an apparel and lifestyle brand operating mainly in the United States, with expanding branches and stores in both Europe and China. Abercrombie is one of the leading specialty retailers of premium casual apparel in the U.S. The company has a strong portfolio of well-established brands.

The fact that ANF has recently hired Goldman Sachs as an advisor, following pressure from activist investor Relational Capital, is positive for the shares after several years of disappointing results. If ANF were to be bought out in a LBO at the mean Enterprise Value/LTM EBITDA multiple of the last four relevant transaction in the space, which was 0.975x, it would imply a share price of $53.

I am positive of ANF recent product launches. Hollister Shirt for Women The company has been manufacturing yoga apparel and shifting its focus from tops to more denim products. These changes could help the company gain shares from competitors like the American Eagle (AEO), Ralph Lauren (RL) or The Gap (GPS). Working under brand names of Hollister, Gilly Hicks, Abercrombie Kids, and Abercrombie and Fitch, A&F already has 1,045 stores operating in North America, Asia, and Europe.

I find very interesting the international expansion strategy that ANF is pursuing. In Europe, the company's key area of international expansion still moves forward as ANF reported a solid revenue growth of 85%. Hollister Shirt for Women brand continues to report strong sales as it covers two-thirds of the company's business in the continent. The company is also expanding in Aisa. A&F is building its third mall-based store in China, as Chinese customers learn to familiarize themselves with the products of the company. Abercrombie plans to open five Abercrombie & Fitch stores in flagship locations including Hamburg, Hong Kong, Munich, Dublin and Amsterdam as well as an Abercrombie kids store in London. In addition, the company plans to open about 40 international Hollister stores in fiscal 2012.

Abercrombie does not simply go head to head against its closest competitor, the American Eagle. Hollister Hoodies Its completely separate chain, Hollister, offers products that are of the same level of pricing with AEO. This makes the competition more like AEO vs. Hollister rather than AEO vs. A&F. Abercrombie generates internal allies, referring to its four separate chains, to prevent cost-cutting just to catch up with competitors, and more importantly, to boost its revenues and net income. In the face of economic challenges, where teenagers have become less active shoppers, Abercrombie has restructured its business and I expect that investors will appreciate those results in the coming quarters. The company has closed its underperforming U.S. chain stores and speeding up growth at its Abercrombie Kids and Hollister store concepts.