Abercrombie & Fitch Has Hit A 'Glass Ceiling,' So Sell It: Wunderlich's Beder

In a report issued Wednesday, Wunderlich analyst Eric Beder reiterated a Sell rating and $15 price target on shares of Abercrombie & Fitch Co. (NYSE: ANF), raising his estimates for fiscal 2016 and fiscal 2017 after the company reported mixed second-quarter results in the morning, still beating earnings and revenue estimates.

Despite the beat, driven by cost cutting initiatives, a lower-than-expected tax rate and constant currency comps down 4 percent, it should be noted that sales were still down 8.2 percent year-over-year. Consequently, the firm is “not convinced that a turn is in effect.”

They think the cost savings are not sustainable, nor a long-term solution, “as management will eventually run out of areas to cut costs and have to grow the business. In order to do this, much more needs to be done to bring more uniqueness to the brand,” the note added.

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In fact, even management admitted it has hit the glass ceiling and needs to offer “more newness and variety across styles, fits, and fabrics.”

The New Estimates

Following the earnings call, Wunderlich released revised estimates for the current and next fiscal year – 2016 and 2017.

For fiscal 2016, the firm is modeling earnings of $$0.66 per share – up from a previous estimate of $0.27 per share – on revenue of $3.4358 billion.

For fiscal 2017, the experts are projecting earnings of $0.79 per share – up from $0.63 per share – on revenue of $3.5354 billion.