Citi upgraded Abercrombie & Fitch to Buy, arguing the recent stock decline is unwarranted given its improving fundamentals. The bank lifted its fiscal 2026 earnings forecast to $11.35 per share and raised its price target to $135 from $90, citing strong holiday sales and a path to sustained growth.

Fourth-quarter results met expectations, with total sales up 5%. Both the Abercrombie and Hollister brands grew, with Hollister posting strong comparable sales. Citi noted the Abercrombie brand returned to positive sales growth for the first time in fiscal 2025, following a year of pricing normalization after an unusually strong 2024.

The bank expects the Abercrombie brand to grow sales in fiscal 2026 rather than just offset Hollister’s gains. Free cash flow is projected at roughly $500 million for a third straight year, supporting continued share buybacks. Citi sees Hollister maintaining steady growth, having gained share in the teen market for several years.