Janney Capital: Abercrombie Downgraded To Sell

In a report published Friday, Janney Capital analyst Adrienne Yih downgraded the rating on

to Sell, while lowering the price target from $17 to $15. The analyst believes that the company would continue to lose market share as it refocuses on a new target. "ANF is changing nearly everything about the legacy business – product, store ops, pricing, logo/fashion content, store design, & target audience. Strategies that refocus on a new target are some of the most difficult turns to effect and can leave a brand in "no man's land," having lost their loyal customer, but not yet connecting with their new customer," analyst Adrienne Yih explained. Although the company posted lower than expected EPS for 1Q115, it continues to focus on achieving a turnaround in 2H15. Abercrombie & Fitch expects to post sequential comp improvement, starting 2Q15 and continuing through the latter half of the year. The analyst believes that this would include "a meaningful impact from logo product as the company laps the significant declines of last year." However, the analyst also believes that weak sales in Europe and Fx headwinds are likely to adversely impact margin and comp performance through 2015. The EPS estimate for the year has accordingly been lowered. Abercrombie & Fitch has been working on making significant changes to better position itself, such as focusing on the customer, defining clear brand positioning, offering a differentiated and compelling assortment, ensuring that each of its channels is scaled and positioned in a way that optimizes brand reach, reducing expenses while improving efficiencies, and organizing the company to achieve goals. "Although we believe the company is making the right changes, we choose to remain on the sidelines until we see improving sales trends and recapturing of market share," analyst Adrienne Yih added.