Susquehanna Downgrades Abercrombie & Fitch (ANF) to Neutral; Fairly Valued

August 19, 2009 9:21 AM EDT

Susquehanna downgrades Abercrombie & Fitch (NYSE: ANF) from Positive to Neutral.

Susquehanna analyst says, "We are downgrading ANF to Neutral from Positive based on a combination of what we deem to be fair valuation and remaining headwinds facing luxury positioned brands. Although select fashion items are resonating with ANF's core shoppers, the brand's higher priced positioning continues to create pressure on average store transactions. As noted by management, gross margins are expected to contract for the balance of the year, albeit to a lesser extent than the first half, due to a combination of higher markdowns and lower IMUs. The AUR will also remain under pressure as ANF adjusts pricing to more appropriately target today's "value-centric" consumers. With ANF's core brands representing mature domestic concepts, international expansion is the primary focus for growth. ANF is on track to open 13 international locations in 2009, and division sales accounted for 7% of 1H09 revenue, with store productivity well above domestic levels. With a continuation of challenging AUR comparisons and macroeconomic headwinds, we are reducing our 3Q09 and 4Q09 comp projections to negative 20% and negative 10%, respectively, and downwardly adjusting our back half EPS forecast by $0.12. Based on our revised forecast, ANF shares are trading in-line with the company's historic average forward P/E multiple, which we deem to be fairly valued."

To see more analyst ratings on ANF Click Here.

Abercrombie & Fitch Co., through its subsidiaries, operates as a specialty retailer of casual sportswear apparel for men, women, and kids.

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• Susquehanna International Group of Companies

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