Deutsche Bank Downgrades Abercrombie & Fitch (ANF) to Sell
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Deutsche Bank downgraded Abercrombie & Fitch (NYSE: ANF) from Hold to Sell with a price target of $13.00 (from $14.00). Analyst Tiffany Kanaga noted the widening valuation gap vs peers.
"We are downgrading ANF to Sell from Hold as we see a prolonged recovery for the Abercrombie brand, and as we adjust our valuation to recognize the widening gap vs. peer AEO (Buy; $18.82) which remains our preferred way to play the teen apparel space. Our ests. are well below the Street (FY17 EPS $0.07 vs. cons. $0.26; EBITDA $211M vs. $248M) as we think deleverage on flat total SSS next year plus brand investments & a lack of SG&A fat left to cut limit margin recovery," said Kanaga.
The analyst added, "On the 3Q conf. call, mgmt. was unable to point to “less bad” tourist trends as the quarter progressed, unlike others incl. M, CRI, and DFRG, and also running counter to improvement in ITA tourism spend (up 2.8% YOY in Sept. vs. Aug. 0.6% & July -1.9%; Figure 7). Moreover, FX represents a ~140 bps headwind to FY17 sales vs. ~90 bps in FY16, as well as a GPM headwind. Without ANF participating in the perceived industry inflection, and without visibility as to when it might see a lessening or reversal of tourist & international challenges, we lack the key catalyst necessary to drive better comps, in our view."
Shares of Abercrombie & Fitch closed at $15.49 yesterday.
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