Retail

Analysts Keep Dialing Back Expectations for Abercrombie & Fitch

Jon C. Ogg

Published: November 21, 2016 1:50 pm

Last Updated: January 12, 2020 5:33 pm

When investors see the stock market hitting all-time highs, some of them might think that all of their stocks are doing great. That is just not always true. One instance where this is not true is Abercrombie & Fitch Co. (NYSE: ANF). Last week’s earnings report took shares down handily and now investors are close to 52-week lows. When a stock is at a 52-week low when the DJIA, S&P 500 and Nasdaq are all hitting all-time highs there might be some concern.

The company posted $0.02 in earnings per share (EPS) and $821.7 million in revenue. The consensus estimates from Thomson Reuters ahead of earnings had called for $0.21 in EPS and revenue of $830.6 million. In the same period of last year, Abercrombie posted EPS of $0.48 and $878.57 million in revenue.

A&F said in its report that its combined comparable sales for the third quarter were down 6% — net sales for the quarter decreased 13% to $358.3 million for Abercrombie and decreased 1% to $463.5 million for Hollister. Direct-to-consumer and omnichannel sales grew to roughly 23% of total company net sales, compared to 21% of total company net sales last year.

On Monday, RBC Capital Markets downgraded Abercrombie & Fitch to Underperform from Sector Perform. They also lowered their price target to $12 from $20.

24/7 Wall St. tracked many other price target cuts seen from Friday and Monday. These have been combined to keep it simple, and the order is simply by firm name. These were the price targets seen for Abercrombie & Fitch:

• BMO Capital Markets has a Market Perform rating but cut its target price to $15 from $18.
• Cowen & Co. has a market perform rating but cuts its price target to $16 from $19.
• Deutsche Bank kept a Hold rating but cut its price target to $14 from $18.
• Jefferies maintained a Buy rating on Friday but cut its price target to $24 from $30.
• J.P. Morgan had a Neutral rating but cut its price target to $12 from $15.
• Mizuho had a Neutral rating but cut its price target to $15 from $20.
• Stifel had a Hold rating but cuts its price target to $14 from $16.
• SunTrust Robinson Humphrey maintained a Buy rating but cut its price target to $19 from $23.
• UBS has a Neutral rating but cut its target price to $15 from $18.
• Wunderlich has a Hold rating but cuts its price target to $12 from $21.

Abercrombie & Fitch closed Thursday up nearly 4% at $16.93 ahead of earnings and this was already a battered and beaten down name. What investors need to worry about here is that the $14.60 close last Friday was actually on a 13% drop that day alone. Now Abercrombie & Fitch has a 52-week range of $14.00 to $32.83.

There is a lesson to be learned hereby all retail and apparel investors. Many retailers and apparel brands become incredibly desired to the point that they can become too hot. Abercrombie & Fitch has been around for years, and there have been periods where the brand was among the most popular in America.

One issue to keep in mind is that preferences change, and retail and apparel players are almost considered to be new companies entirely two or three times a year. You can get 10 quarters great, but one quarter or two of missing the demand for apparel can wreck a company’s perception. Abercrombie & Fitch has had to endure the latter on multiple occasions over many years now.