As we transition into fall, parents and kids are shifting their thoughts from summer vacation to back-to-school shopping.

And this year, I’m betting they head back to Abercrombie & Fitch (NYSE: ANF).

[ad#Google Adsense 336×280-IA]Consumer habits are changing, and Abercrombie & Fitch is now in a great position to capitalize on the “denim renaissance.”

Thanks to a new management team and a fresh marketing campaign, the company should continue generating ample cash flow and pumping out dividends in the years to come.

It’s time to consider adding this old-school to your back-to-school portfolio.

An Impressive Revival

Fashion is a fickle beast. Trends come and go. And unfortunately, many mall-based retailers learn this lesson the hard way.

For example, several stores failed to listen to the marketplace and missed out on the “athleisure” movement of yoga and jogging pants. Sales plummeted, and many of these publicly traded “teentailers” went bankrupt.

Abercrombie & Fitch’s business suffered, too.

Customers abandoned the brand in droves, but the company clung to its classic offerings of overpriced logo-covered T-shirts and jeans. Negative publicity over its policies and former CEO’s comments didn’t help matters. It lost its premium pricing power, its audience and its investors.

Two years ago, Marc Lichtenfeld told CNBC that he wouldn’t touch the stock. He said management had lost touch with its customer base and the company wasn’t generating consistently positive cash flow.

He was right. Abercrombie & Fitch’s stock price has been cut in half since then.

But a lot has changed in two years. The company has an entirely new management team. It has listened to what members of its target market want and is now giving it to them.

Stores have been redesigned. Logos have been removed from its apparel, and the company has added diversity to its marketing.

Most importantly, it has returned its focus to its core competency: denim.

Today, a bet on Abercrombie & Fitch isn’t a bet on fashion. It’s a bet on quality basics.

Back to Basics Means Back to Quality

This year, students of all ages are going back to school in denim.

After years of declining sales, denim is back in a big way. A recent survey found that it’s a top trend for the first time since 2013. It has a lot to do with new technology making jeans more comfortable.

Denim has always been the backbone of Abercrombie’s product line. Abercrombie & Fitch and its Hollister brand are leading the denim renaissance with a line of stretch jeans. They are comfortable enough to make me consider leaving my yoga pants in the drawer. And I’m not the only one…

Jeans are at the top of most students’ back-to-school shopping lists. And when it comes to basics, quality clothing is necessary. Well-made jeans, like the ones Abercrombie sells, are expected to last for years.

Shoppers may buy disposable items like trendy shirts from fast fashion retailers, but they won’t buy clothing staples like denim from them.

The other thing about jeans is that they must be tried on in order to ensure a good fit. The denim renaissance will bring many of Abercrombie and Fitch’s old customers back into its stores. They’ll have a chance to fall in love with the brand all over again.

The Comeback Kid

“Back to school” is the second-largest shopping holiday of the year. It provides a great preview of which retailers will do well during the much larger December holiday shopping season. As a result, Abercrombie & Fitch’s sales should exceed Wall Street’s expectations.

As students bring Abercrombie & Fitch’s clothing back to the classroom, the company’s stock price should move to the head of the class.

And investors . Why not consider putting Abercrombie & Fitch shares on your own back-to-school shopping list?

Good investing,

Kristin

[ad#IPM-article]

Source: Wealthy Retirement