Prudential downgraded Abercrombie & Fitch (ANF) to neutral from buy.
Analyst Stacy Pak says the 51 cents third-quarter earnings per share is in line with the recently lowered guidance of 48 cents to 51 cents. She cut the $1.04 fourth-quarter earnings per share estimate to 93 cents, in line with management's new guidance. She also cut the $2.16 fiscal 2004 (Jan.) earnings per share estimate to $2.04, and cut the $2.56 fiscal 2005 estimate to $2.15.
Pak says she downgraded as same-store sales continue to be negative, and as expense opportunities diminish for the retailer. She says Abercrombie's operating margin looks unsustainably high, and the company doesn't have an explanation for these negative transactions. Additionally, Pak says she's troubled by recently weak same-store trends at Abercrombie's Hollister brand. She cut the $36 target to $26.