Abercrombie & Fitch: Solid Long-Term Story but Near-Term Normalization Warrants Hold Rating

Analyst Paul Lejuez from Citi maintained a Hold rating on Abercrombie Fitch and keeping the price target at $90.00.

Paul Lejuez has given his Hold rating due to a combination of factors related to Abercrombie & Fitch’s recent performance and outlook. Management’s updated fourth-quarter sales guidance came in toward the middle of the prior range and below elevated investor expectations, and earnings and margin guidance, while solid, showed no incremental upside versus what had already been communicated. The stock reacted negatively to this reset, suggesting that much of the recent strength in the business—especially A&F’s exceptionally strong 2024—was already reflected in the share price. In addition, the company is entering a period of “normalization” in 2025, with tougher comparisons and some comp pressure at the A&F brand, which tempers near-term upside despite healthy traffic trends and disciplined promotions.

At the same time, Lejuez recognizes several positives that support maintaining, rather than reducing, the rating. Management articulated a credible plan to pursue steady, sustainable growth at both A&F and Hollister, emphasizing balanced category exposure, ongoing international expansion, and selective pricing moves to offset tariffs without damaging value perception. Hollister’s decelerating growth is seen as normalization rather than a structural problem, and the team remains constructive on key product areas such as denim. With marketing investment set around 5% of sales and the CEO shifting focus toward longer-term brand and partnership opportunities, the longer-term story remains intact. However, given the near-term expectation of a negative share price move and the absence of clear catalysts to drive multiple expansion, a Hold recommendation is deemed appropriate.