Stifel Downgrades Abercrombie & Fitch (ANF) to Hold
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Stifel downgraded Abercrombie & Fitch (NYSE: ANF) from Buy to Hold, citing a lack of visibiilty for near-term improvement.
Analyst Richard Jaffe commented, "Our positive thesis on ANF shares has been that a more thoughtful, on-brand and balanced merchandise assortment combined with a favorable response to the significant marketing investments would drive 2H comp improvement and expense leverage. However, following today’s earnings call, we lack visibility for near-term improvement. Management expects 2H comparable sales to remain challenged despite the impact from a strengthened merchandising and design team (which were hired in August 2015) and a significant increase in marketing spend to support the brands’ repositioning. This indicates to us that ANF’s problems run deeper than just external headwinds (FX and weak tourist traffic). Instead we believe the current merchandise is failing to resonate with consumers particularly at A&F, and the new marketing campaign is not driving traffic."
"A difficult global retail backdrop and a lack of positive indications from management regarding the back-to-school floorset challenges the achievability of 2H16 improvement and undermines investor confidence in ANF as a turnaround story. We are taking a more conservative view on 2016 and 2017 sales and profit. With the stock trading at approximately 19x our new 2017 EPS estimate of $0.95 (relatively in-line with the one year average of the out year multiple, 20x), we see insufficient upside to justify a Buy rating and are moving to Hold."
Shares of Abercrombie & Fitch closed at $18.29 yesterday.
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