Abercrombie & Fitch
was downgraded by Banc of America a day after the company posted its quarterly results, and shares of the apparel retailer were falling in early trading Wednesday.
Banc of America downgraded the stock to neutral from buy with a $60 price target. The firm said that while there could be some upside possibility relative to estimates, the risk vs. the reward is less attractive, partly because of merchandise margins, which are already flattening.
After the close of trading Tuesday, Abercrombie said first-quarter net income was $40.4 million, or 45 cents a share, on sales of $546.8 million. Same-store sales increased 19%. Analysts polled by Thomson First Call were looking for a profit of 42 cents a share.
The company also said that based on its plan to increase inventory commitments for the back-to-school selling period, especially in denim, it expects a cash and marketable securities balance of $150 million to $200 million at the end of the second and third quarters.
Based on seasonal shopping trends, Abercrombie expects its cash and marketable securities level to increase during the fourth quarter.
Abercrombie's shares were down $2.48, or 4.2%, to $56.51 in trading on the New York Stock Exchange.