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Abercrombie & Fitch Co. Message Board

  • danjason2002 danjason2002 Jan 28, 2007 5:01 PM Flag

    Monday Morning Downgrade

    Piper Jaffries citing valuation

    "we believe the stock has limited upside and is prone to inventory risks, we feel the decreasein same store sales from abercrombie is alarming and coupled with strong comepttion from teen apparel amercian eagle adn aerostaple limit upside in hollister" Abercrombie inability to discount and

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    • "Piper Jaffries citing valuation

      "we believe the stock has limited upside and is prone to inventory risks, we feel the decreasein same store sales from abercrombie is alarming and coupled with strong comepttion from teen apparel amercian eagle adn aerostaple limit upside in hollister" Abercrombie inability to discount and

      So often the bearish case is made so badly that I feel the urge to make it myself. There is a bearish case to be made against Abercrombie, but not this one. The author of this piece cites valuation as a reason for downgrading the stock which means that there is nothing that wrong with the business, the stock price is just to see. But he goes on to raise issues about the business. He says the company has limited upside potential. But do even bears believe this? Abercrombie has grown by successfully developing new divisions. As long as it can do this, the upside isn't limited. Its just a question of whether it can. Does anyone think the decline in SSS is alarming? The market which has had the oppotunity to digest November and December numbers doesn't seem alarmed. Abercrombie matched difficult comparisons from the year earlier. Also some of its divisions are maturing which will always lead to a levelling of off SSS numbers. And of course, the fragment about inability to discount. Obviously, there is nothing stopping Abercrombie from marking down prices. They have discounted in earlier years, but they didn't have to do that this Christmas. That's a sign of strength not weakness.

      This is a hard business. Abercrombie has to respond to anticipate ever changing teenage tastes. The stock can be volatile and has had a good run. It isn't for the risk averse, but anyone looking for a well run company with a solid growth strategy and a history of bouncing back from adversity, should give these shares a look, particularly on weakness.

    • Yes, but:

      01/25/2007 Bank of America upgrades ABERCROMBIE & FITCH to BUY.

      01/22/2007 Market Edge upgrades ABERCROMBIE & FITCH from SELL to BUY.

 
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