Capital Structure and Firm Valuation Analysis of Abercrombie & Fitch Co. (ANF)

Yanan Li

Co-Presenters: Individual Presentation

College: College of Business and Public Management

Major: BS.FINANCE

Faculty Research Mentor: Andreas Kakolyris

Abstract:

This project investigates the financial performance and firm valuation of Abercrombie & Fitch Co. (ANF), a publicly traded U.S. apparel retailer. The objective of this analysis is to determine whether the company’s recent improvements in profitability and operating performance are supported by strong financial fundamentals and whether these improvements are reflected in its intrinsic value. The study also seeks to evaluate the company’s financial risk profile and long-term sustainability within a competitive retail environment.
The analysis begins with a comprehensive review of ANF’s income statement, balance sheet, and statement of cash flows. Ratio analysis and trend analysis are applied to assess profitability, liquidity, leverage, and operating efficiency over recent years. Key indicators such as revenue growth, operating margin, return on equity, debt-to-equity ratio, and free cash flow generation are examined to evaluate financial strength and capital management decisions.
Building on this financial foundation, the project estimates the cost of equity using the Capital Asset Pricing Model (CAPM) and incorporates the weighted average cost of capital (WACC) into a valuation framework. Projected free cash flows are used to estimate the firm’s intrinsic value under reasonable assumptions.
The findings suggest that improved margins, disciplined cost control, and strengthened balance sheet management enhance ANF’s financial stability and support its valuation. This study demonstrates how integrating financial statement analysis with valuation techniques can provide meaningful insights for investment and strategic decision-making.