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Abercrombie & Fitch Remains Well Positioned to Generate Sustainable Growth, UBS Says

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Abercrombie & Fitch (ANF) remains well positioned to generate sustainable growth through product innovation, category expansion, inventory management, as well as a greater international footprint, UBS Securities said in a research note.

Building on this, the investment firm projected a 13% five-year EPS compound annual growth rate, and said that the company's current earnings power is supported by mid-single digit percentage sales growth, higher gross margin, and increased cash returns to shareholders.

Additionally, sales of the Hollister brand have accelerated in Q3-to-date from Q2 levels on account of timely inventory replenishment, UBS said in a note Wednesday, adding that this should support sales growth improvement in H2.

UBS further said that while Abercrombie & Fitch has benefitted from tariff refunds, the company's gross margin upside in Q2 was aided by better-than-expected average selling prices per unit and reduced promotional activity, indicating resilient merchandise margins despite the tariff environment.

UBS raised its price target to $185 from $153 and maintained its buy rating.

Price: $148.17, Change: $+0.42, Percent Change: +0.28%

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