Barclays Initiates Coverage of Ann Inc with Rating Price Target

Barclays initiated coverage of Ann Inc. ANN on Friday with an Equal Weight rating and Price Target of $42.

Analyst Matthew McClintock noted that the company “is primarily an operating margin recovery story, which we believe can reach double digits longer term (vs. 6.8 percent in 2013): The company can achieve this goal simply from a 10-15 percent increase in store productivity levels to $475-$500 SSF from ~$430 in 2013.”

McClintock also thought that “expectations surrounding potential activism has reduced the valuation attractiveness of the fundamental story” with the stock’s current level of 19.8x the 2014 expected EPS representing “the highest valuation in over four years.”

McClintock believed that the company’s capital structure is appropriate but additional leverage could result in a lower valuation.  As a result, the report advocated remaining “on the sidelines until a better entry point avails itself.”

Ann Inc. traded at $39.85 late Friday, up 0.63%