Prudential Downgrades Nautica to 'Sell'

Analyst Lizabeth Dunn says the retailer's stock price reflects a potential sale of the company, which she thinks is unlikely

Prudential downgraded Nautica Enterprises (NAUT ) to sell from hold.

Analyst Lizabeth Dunn says she thinks the stock valuation of this men's retailer is extended. She says recent proxy statements from both Nautica and Barington, as well as talks with management, shed a little more light on the current proxy battle, and Nautica's strategies for unlocking shareholder value.

Earlier this month, Nautica shareholder Barington nominated three candidates to the the company's board to push for changes in executive pay and to explore a possible sale of the Manhattan-based garment maker. But Dunn notes that one of Barington's nominees for the board withdrew, which she thinks makes Nautica management's position stronger in a proxy fight.

Dunn says a sale of the company is unlikely, yet she thinks the stock fully reflects an acquisition. She also believes that, while management has strategies to turn the business around, progress will take time.

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