Wunderlich Cuts Abercrombie & Fitch, Sees Teen Retail As 'Toxic'

Wunderlich on Friday maintained its Hold on Abercrombie & Fitch Co. ANF and cut its price target from $48 to $30.

Analyst Eric Beder commented that he was “slashing our estimates and price target after the company announced highly disappointing 3Q results despite material cost cutting, easy comparisons, and sharply lower inventories, as both domestic and international operations remain in free fall.”

“Despite what has been an industry-wide contraction in inventory levels, the teen customer appears, frankly, uninterested in apparel shopping; given that we do not see a change in sentiment in the near term and we believe the teen segment is in for a rough few years as it shrinks and refocuses, we see no reason to be aggressive in the sector,” according to Beder.

The analyst report added that “there are too many stores, too many players, aggressive new entrants by lower priced chains and, perhaps most important, a customer base that is not interested in logos and who views apparel as a somewhat commodity-based item.”

The report concluded, “given the miss and what we view as a toxic space in teen retailing right now, we see no reason to be aggressive in the segment beyond short-term trading opportunities.”

Abercrombie & Fitch recently traded at $30.62, down 13.4 percent.