Abercrombie stock is on the decline. The next test will be earnings on Wednesday.

Abercrombie & Fitch shares are rallying to new highs even as the broader retail sector underperforms the market.

Abercrombie shares are up 73% this year and have gained as much as 409% in the last 12 months. As the company prepares to report fiscal first-quarter results on Wednesday morning, the question that haunts investors is whether the stock’s surge can continue.

Analysts say if the stock sells off after earnings, it likely won’t be because of the company’s poor performance. The retailer has posted strong quarterly results over the past year, and the latest period is expected to be no different.

Dana Telsey, CEO of Telsey Advisory Group, expects both the company’s bottom line and bottom line to grow, driven by the continued momentum of the Abercrombie brand and how well it resonates with target consumers.

“The Abercrombie brand remains healthy thanks to a resilient customer
basic and strong range,” she wrote in a research note last week. She added that the Hollister brand is also seeing improved sales trends.

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The bigger risk for the stock is that investors have started expecting too much from the company’s results, and anything less than perfect in the report could impact the stock post-results. Indeed, this occurred after the company’s last two earnings reports – the company’s shares fell in the immediate aftermath before rebounding to new highs.

“Although everything looks very good on ANF, expectations are high and the stock is crowded,” wrote Paul Lejuez, an analyst at Citi, ahead of the results.

Earnings per share estimates for the quarter increased by nearly 15% last month alone and by as much as 151% over the past three months.

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Analysts polled by FactSet expect the company to earn $1.76 per share for the quarter ended in April, compared with 39 cents per share in the same period a year ago. Revenue is expected to grow approximately 16% year-over-year to $967 million.

That said, investors and analysts will be closely watching the company’s forward-looking comments for any signs of slowing brand momentum or that the brand faces more pressure from a slowdown in consumer spending, something other retailers have seen this earnings season.

“We are concerned that ANF may face normalization in demand and/or decline after the first half of this year due to typical execution errors (and) cyclicality in fashion,” wrote Alex Straton, an analyst at Morgan Stanley.

Fellow clothing retailer American Eagle Outfitters

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It will also release quarterly results on Wednesday.

Write to Sabrina Escobar at [email protected]