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RBC Trims Abercrombie Price Target To $20

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RBC Trims Abercrombie Price Target To $20

Brian Tunick of RBC Capital Markets argued in a research note that Abercrombie & Fitch Co. (NYSE: ANF) is "fighting a good fight" but its second quarter earnings report, which includes an earnings miss puts a damper on the company's outlook.

Tunick highlighted Abercrombie's traffic challenges in its flagship and international tourist locations, which weighted on the "majority" of the comp decline. By brand, A&F comped negative 7 percent while Hollister comped negative 2 percent. On the other hand, international comps improved sequentially to negative four percent from negative 7 percent last quarter, the U.S. business (negative 4 percent) acted as a "negative surprise."

Related Link: Abercrombie & Fitch Shares Plummet 14% After Missing EPS Estimates For Second Straight Quarter

Turnick continued that there is now "little visibility" on the international and tourist front and management itself even cited a lack of catalyst. In fact, the comp outlook was revised to "challenging" from a sequential improvement, and the analyst's bottom half of 2016 comp estimate was revised to negative four percent from a prior negative three percent.

Bottom line, the company's second-quarter earnings miss and comp outlook reduction "fell short of a building bar" at a time when many other department stores and specialty retailers are communicating encouraging commentary. As such, shares are likely to "remain volatile around quarterly updates" and investors should "remain on the sides."

Shares remain Sector Perform rated with a price target lowered to $20 from a previous $23 due to a worse than previously expected bottom half to 2016.

At time of writing, shares were down 1.58 percent on Thursday, trading at $17.46.

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Latest Ratings for ANF

DateFirmActionFromTo
Dec 2020Morgan StanleyMaintainsUnderweight
Nov 2020B of A SecuritiesMaintainsUnderperform
Nov 2020UBSMaintainsNeutral

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