Critical Review: Abercrombie & Fitch (NYSE:ANF) and Levi Strauss & Co. (NYSE:LEVI)

Abercrombie & Fitch (NYSE:ANF) and Levi Strauss & Co. (NYSE:LEVI) are both mid-cap retail/wholesale companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, dividends, valuation, profitability, institutional ownership, risk and analyst recommendations.

Earnings and Valuation

This table compares Abercrombie & Fitch and Levi Strauss & Co.”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Abercrombie & Fitch	$5.28 billion	0.78	$506.92 million	$10.42	8.87
Levi Strauss & Co.	$6.28 billion	1.49	$578.10 million	$1.57	15.53

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

Profitability

This table compares Abercrombie & Fitch and Levi Strauss & Co.’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Abercrombie & Fitch	9.34%	34.36%	13.50%
Levi Strauss & Co.	9.52%	25.35%	8.32%

Risk & Volatility

Abercrombie & Fitch has a beta of 0.89, indicating that its share price is 11% less volatile than the S&P 500. Comparatively, Levi Strauss & Co. has a beta of 1.33, indicating that its share price is 33% more volatile than the S&P 500.

Dividends

Abercrombie & Fitch pays an annual dividend of $0.80 per share and has a dividend yield of 0.9%. Levi Strauss & Co. pays an annual dividend of $0.56 per share and has a dividend yield of 2.3%. Abercrombie & Fitch pays out 7.7% of its earnings in the form of a dividend. Levi Strauss & Co. pays out 35.7% 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. Levi Strauss & Co. has increased its dividend for 4 consecutive years. Levi Strauss & Co. is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Abercrombie & Fitch and Levi Strauss & Co., as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Abercrombie & Fitch	1	4	8	0	2.54
Levi Strauss & Co.	0	3	13	0	2.81

Abercrombie & Fitch currently has a consensus target price of $112.64, indicating a potential upside of 21.89%. Levi Strauss & Co. has a consensus target price of $27.21, indicating a potential upside of 11.63%. Given Abercrombie & Fitch’s higher probable upside, research analysts plainly believe Abercrombie & Fitch is more favorable than Levi Strauss & Co..

Institutional & Insider Ownership

69.1% of Levi Strauss & Co. shares are owned by institutional investors. 2.3% of Abercrombie & Fitch shares are owned by company insiders. Comparatively, 1.1% of Levi Strauss & Co. shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Summary

Levi Strauss & Co. beats Abercrombie & Fitch on 11 of the 17 factors compared between the two stocks.

About Abercrombie & Fitch

Abercrombie & Fitch Co. engages in the retail of apparel, personal care products, and accessories. The firm operates through following geographical segments: Americas, EMEA and APAC. The Americas segment includes operations in North America and South America. The EMEA segment includes operations in Europe, the Middle East and Africa. The APAC segment includes operations in the Asia-Pacific region, including Asia and Oceania. The company was founded by David Abercrombie in 1892 and is headquartered in New Albany, OH.

About Levi Strauss & Co.

Levi Strauss & Co. engages in the design, marketing, and sale of apparel products. The company offers jeans, casual and dress pants, tops, shorts, skirts, jackets, footwear, and related accessories. It operates through the following geographical segments: Americas, Europe, and Asia. The company was founded by Levi Strauss in 1853 and is headquartered in San Francisco, CA.