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Abercrombie & Fitch (NYSE:ANF) is a specialty retailer that competes with players like Gap (NYSE:GPS), American Eagle (NYSE:AEO) and Urban Outfitters (NASDAQ:URBN). The company operates Abercrombie & Fitch stores and Hollister stores, which contribute 36% and 28% respectively to the $54 Trefis price estimate for company’s stock.

A&F sees a significant upside in expanding the presence of its A&F and Hollister brands in international markets, especially Europe and Asia. There could be additional upside to the Trefis price estimate for A&F’s stock if the company’s store count were to increase as a result of international expansion.

Abercrombie & Fitch’s Luxury Image Helps It to Boost Sales in International Markets

The Abercrombie & Fitch stores in Europe have shown strong comparable store sales growth even during the recent economic downturn. In addition to this, the company’s international sales were up 102% during the first fiscal quarter of 2010 compared to the same quarter in 2009.

The Asian market is becoming a focal point of the retail industry, with major retailers across the world fast forwarding their plans for growing in this region. Asian consumers, backed by increasing disposable income, are showing a stronger inclination towards luxury and fashion forward brands, and Abercrombie & Fitch can leverage its image as a luxury retailer to gain a foothold in this market.

The company opened a flagship store in Tokyo in fiscal 2009 and is planning to add stores at up-market shopping locations in South East Asia. Its expansion plans in Europe include opening flagship stores in Copenhagen and Madrid. In addition to this, the company plans to open around 30 international mall based Hollister stores in fiscal 2010.

Improving Economic Environment Provides Support to Abercrombie & Fitch’s Expansion Plans

With Abercrombie & Fitch being among the specialty retailers who were severely hit during the recent economic downturn, we have been conservative on its growth plans between 2010-16. Currently, we expect the number of Abercrombie & Fitch stores to grow at an annual rate of around 2-3% and cross 400 stores by 2015.

The number of Hollister stores is expected to grow at an annual rate of nearly 3% and reach around 650 stores by 2016.

However, if the company is able to report strong results in fiscal 2010, there would be a further upside to our growth forecasts for the company. In a favorable economic environment, as was the case before 2008, we believe the company has the potential to expand the Abercrombie & Fitch brand to 450 stores and the Hollister brand to 700 stores by 2016. In this case, there would be a further 7-8% upside to our price estimate of Abercrombie & Fitch’s stock.

You can modify our forecast below to see the impact of the number of Abercrombie & Fitch stores and the number of Hollister stores on Abercrombie & Fitch’s stock price.

Disclosure: No positions