Stifel Sidelined on Abercrombie & Fitch (ANF) Until Merchandise Turnaround Becomes Clearer

Stifel reaffirms its Hold rating on Abercrombie & Fitch Co. (NYSE: ANF) following Q1 results issued earlier on the session. ANF posted Q1 loss of $0.53 per share versus the firm's $0.39 per share loss estimate.

Analyst Richard Jaffe commented, Poor results were driven by the anniversarying of a difficult comparison in the logo apparel business and FX pressure. Additionally, the company’s merchandise assortments are failing to resonate with consumers as sales and traffic trends continue to be weak. Only time will tell if the consumer is willing to give ANF a second chance. Given current trends, we lack visibility for near-term improvement. We reiterate our Hold rating.

Looking forward: The next inflection point will be the back-to-school floorset, set before Labor Day. Management believes that the initiatives, put in place by the recently hired A&F and Hollister brand Presidents, will begin to gain traction by this time. An inventory write-down in 1Q will better position the businesses with fresh product for the back to school season. At this point, we remain on the sidelines until visibility of a merchandise turnaround becomes clearer. We believe the reward potential is limited near term and risk remains significant, given the competitive teen environment and challenges associated with a merchandise turnaround. We reiterate our Hold rating.

For an analyst ratings summary and ratings history on Abercrombie & Fitch click here. For more ratings news on Abercrombie & Fitch click here.

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