NEW YORK (TheStreet) -- Shares of Abercrombie & Fitch (ANF) are slightly higher at $28.50 in pre-market trade after Bloomberg reported that private equity firms are focused on the specialty retailer following the departure of its CEO Mike Jeffries.
That clears the way for any suitors interested in the teen retailer, Bloomberg said.
Jeffries, 70, was long seen as an obstacle to a takeover. At least one buyout firm considered a deal before walking away over concerns about his leadership, a source told Bloomberg two years ago. For buyers wanting to take another look, the stock is just as cheap now.
As the $2 billion chain has lost appeal among teens, Abercrombie's stock price has also deflated and even attracted activist shareholders including Ralph Whitworth, Bloomberg noted, adding that it's been mentioned by retail analysts as a top leveraged-buyout candidate in recent years because the business generates cash, has a valuable brand and needs some sprucing up -- hallmarks of LBO targets.
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 increase in net income, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 216.5% when compared to the same quarter one year prior, rising from -$15.64 million to $18.23 million.
- ABERCROMBIE & FITCH reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ABERCROMBIE & FITCH reported lower earnings of $0.70 versus $2.92 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus $0.70).
- ANF has underperformed the S&P 500 Index, declining 21.83% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Specialty Retail industry and the overall market, ABERCROMBIE & FITCH's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: ANF Ratings Report
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