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Why Would Anyone Buy Abercrombie?

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Why Would Anyone Buy Abercrombie?

Abercrombie & Fitch Co. (NYSE: ANF) is up for sale, but Wunderlich Securities can’t figure out why anyone would want to buy the struggling retailer.

The iconic teen brand is in preliminary talks for a potential transaction after receiving interest from “several parties.”

The Wall Street Journal listed Express, Inc. (NYSE: EXPR) and American Eagle Outfitters (NYSE: AEO) as potential suitors in the company.

Wunderlich Unsure Of M&A Probability

Wunderlich Securities is not optimistic about a deal getting done anytime soon, given Abercrombie’s free fall, a history of mergers in specialty retailer not working and a brutal operating environment.

“We believe the potential, especially for material premium for ANF is minimal and we see little potential for a transaction at a current time,” said Wunderlich Securities analysts Eric Beder and Bryan Caronia.

While the company has confirmed the rumors that it is in discussions for a potential transaction, Abercrombie & Fitch did not confirm it has hired an investment bank; analysts, however, believe the company has in fact done so.

“We believe that there is very limited market of strategic buyers which would pay a cash premium for a declining concept in a declining market,” added Wunderlich analysts.

The specialty retail market has been difficult environment in 2017, with nine specialty retail chains declaring bankruptcy in the first quarter of the year, equal to the same number seen in all of 2016. More are expected to follow suit, giving analysts no reason to see why a strategic investor would increase exposure to the most difficult U.S. retailing market.

Wunderlich Securities has downgraded Abercrombie & Fitch to a Sell rating with a $12 price target.

Related Links:

Abercrombie & Fitch Retreats From Highs Amid M&A Talk 

Wall Street's M&A Chatter From May 9
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Image Credit: By Ruehl boi11386 at English Wikipedia, CC BY-SA 3.0, via Wikimedia Commons

Latest Ratings for ANF

DateFirmActionFromTo
Apr 2020Morgan StanleyMaintainsUnderweight
Apr 2020B. Riley FBRMaintainsBuy
Apr 2020B. RileyUpgradesNeutralBuy

View More Analyst Ratings for ANF
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