Head-To-Head Review: Abercrombie & Fitch (ANF) and Citi Trends (CTRN)

Abercrombie & Fitch (NYSE: ANF) and Citi Trends (NASDAQ:CTRN) are both small-cap retail/wholesale companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, dividends, risk, institutional ownership, valuation, profitability and analyst recommendations.

Earnings and Valuation

This table compares Abercrombie & Fitch and Citi Trends’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Abercrombie & Fitch $3.30 billion 0.30 $181.74 million ($0.31) -46.22
Citi Trends $712.38 million 0.41 $35.16 million $0.91 22.32

Abercrombie & Fitch has higher revenue and earnings than Citi Trends. Abercrombie & Fitch is trading at a lower price-to-earnings ratio than Citi Trends, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

98.5% of Abercrombie & Fitch shares are owned by institutional investors. Comparatively, 90.8% of Citi Trends shares are owned by institutional investors. 0.6% of Abercrombie & Fitch shares are owned by company insiders. Comparatively, 4.6% of Citi Trends shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent ratings and price targets for Abercrombie & Fitch and Citi Trends, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Abercrombie & Fitch 5 13 3 0 1.90
Citi Trends 0 0 0 0 N/A

Abercrombie & Fitch presently has a consensus price target of $12.00, suggesting a potential downside of 16.26%. Given Abercrombie & Fitch’s higher probable upside, equities analysts plainly believe Abercrombie & Fitch is more favorable than Citi Trends.

Risk and Volatility

Abercrombie & Fitch has a beta of 0.83, suggesting that its share price is 17% less volatile than the S&P 500. Comparatively, Citi Trends has a beta of 0.42, suggesting that its share price is 58% less volatile than the S&P 500.

Profitability

This table compares Abercrombie & Fitch and Citi Trends’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Abercrombie & Fitch -0.62% -0.79% -0.42%
Citi Trends 1.88% 6.93% 4.69%

Dividends

Abercrombie & Fitch pays an annual dividend of $0.80 per share and has a dividend yield of 5.6%. Citi Trends pays an annual dividend of $0.32 per share and has a dividend yield of 1.6%. Abercrombie & Fitch pays out -258.1% of its earnings in the form of a dividend. Citi Trends pays out 35.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Abercrombie & Fitch is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Abercrombie & Fitch beats Citi Trends on 8 of the 14 factors compared between the two stocks.

About Abercrombie & Fitch

Abercrombie & Fitch Co. is a specialty retailer who primarily sells its products through store and direct-to-consumer operations, as well as through various wholesale, franchise and licensing arrangements. The Company operates through two segments: Abercrombie, which includes the Company’s Abercrombie & Fitch and abercrombie kids brands, and Hollister, which includes the Company’s Hollister and Gilly Hicks brands. The Company offers an array of apparel products, including knit tops, woven shirts, graphic t-shirts, fleece, sweaters, jeans, woven pants, shorts, outerwear, dresses, intimates and swimwear, and personal care products and accessories for men, women and kids under the Abercrombie & Fitch, abercrombie kids, Hollister and Gilly Hicks brands. The Company has operations in North America, Europe, Asia and the Middle East. As of January 28, 2017, the Company operated 709 stores in the United States and 189 stores outside of the United States.

About Citi Trends

Citi Trends, Inc. is a retailer of urban fashion apparel and accessories. The Company’s segment is retail operations. The Company operates approximately 520 stores in both urban and rural markets in over 30 states. The Company offers products under its brands, such as Citi Steps and Red Ape. The Company’s merchandise includes apparel, accessories and home. Within apparel, the Company offers fashion sportswear for men, women and children, including offerings for newborns, infants, toddlers, boys and girls. Accessories include handbags, jewelry, footwear, belts, intimate apparel, scrubs and sleepwear. The Company’s home merchandise includes decorative home product, functional home product, beauty, books, toys and electronic accessories. The Company sources its merchandise from approximately 1,700 vendors, consisting of domestic manufacturers and importers.

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