S&P alters Abercrombie & Fitch view to positive

S&P said it revised Abercrombie & Fitch Co.’s outlook to positive from stable and affirmed its ratings on the company, including the BB ratings on its senior secured notes and loans.

“The positive outlook reflects continued strength at its main two brands—Abercrombie and Hollister—although we expect performance will moderate in 2022 as consumer savings normalize. ANF's 2021 results outperformed our former base case, thanks to a strong revenue growth at Abercrombie (about 42% of total net sales), which grew 6% in the fourth quarter of 2021, and Hollister (about 58% of total net sales), which grew 2%,” the agency said in a press release.

S&P said it estimates higher sales volumes and lower occupancy expenses will lead to steady cash flow and earnings, with leverage remaining below 3x on a sustained basis.

“The positive outlook reflects the potential for a higher rating over the next 12 months if ANF sustains positive operating trends across its two key brands and meets our forecast while maintaining adjusted leverage below 3x,” S&P said.

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