Global Brand Appeal Driving Abercrombie and Fitch's Growth; Reiterate Buy

5/16 - "We continue to be amazed that casual luxury teen retailer ANF trades at a discount valuation, despite the proven strength of its portfolio of concepts, ability to generate full price selling at premium price points, and consistently stable industry-high operating margins. At 11.4x our FY2009 EPS estimate of $6.66, ANF is trading at a substantial discount to the sector average of ~15.2x and its long term organic growth rate of 18%, which we think is undeserved."

"With ~$2.08 in cash per share, a $0.70 annual dividend,
a share repurchase program, as well as sales and earnings growth momentum, we think fair market value for ANF is ~14.6x our FY09 EPS estimate. This implies to us a fair value of about $97, representing a potential return of ~28% from current levels. Therefore, we reiterate our Buy rating."

"F1Q EPS grew 6.0% to $0.69 vs. $0.65 Y/Y, beating
consensus and our estimate of $0.66 by 3 cents...ANF reiterated F1H08 EPS guidance of $1.61 to $1.65 vs.
$1.53LY, which implies F2Q EPS guidance of $0.92 to $0.96,
in-line with consensus of $0.95, but below our estimate of
$0.98...We are not changing our FY08 estimate of $5.85. However, we are changing our quarterly 2008 estimates to $0.96, $1.49, and $2.71, down from $0.98, $1.50, and $2.71, respectively."