NEW YORK (TheStreet) -- Credit Suisse upgraded Abercrombie & Fitch (ANF) to "outperform" from "neutral," set a $52 target price and increased its estimates. The firm noted that the apparel retailer is cutting costs.
"The big news...is that the company is finally addressing a premium pricing strategy that has exacerbated challenging underlying demand conditions," the firm wrote in a research note. "We expect a more price-competitive strategy to lead to a return to positive earnings momentum when combined with: 1) Aggressive cost controls; 2) Continued emphasis on appropriate square footage reduction in the U.S.; 3) Accelerated investments in eCommerce; 4) Tighter control of inventory; and 5) Renewed emphasis on return of cash to shareholders."
The stock was rising 6.35% to $41.55 at 9:43 a.m. on Tuesday.
Separately, TheStreet Ratings team rates ABERCROMBIE & FITCH as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ABERCROMBIE & FITCH (ANF) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ANF's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for ABERCROMBIE & FITCH is rather high; currently it is at 58.81%. Regardless of ANF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.08% trails the industry average.
- ANF, with its decline in revenue, slightly underperformed the industry average of 5.5%. Since the same quarter one year prior, revenues fell by 11.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The share price of ABERCROMBIE & FITCH has not done very well: it is down 16.21% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Specialty Retail industry and the overall market, ABERCROMBIE & FITCH's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: ANF Ratings Report