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On Monday, Citi analysts adjusted their outlook for Abercrombie & Fitch Co. (NYSE:ANF), lowering the price target on the retailer's shares to $98 from the previous $135, while retaining a Buy rating on the stock. The change in price target comes as the analysts recalibrated their expectations for the company's financial years 2025 and 2026, citing a combination of lower sales projections and increased product costs due to tariffs, which are only partly mitigated by anticipated reductions in selling, general, and administrative expenses (SG&A).
The revised forecasts for Abercrombie & Fitch now anticipate a modest increase in fiscal year 2025 sales of 0.3%, a significant reduction from the previously projected 4.6% growth. Additionally, the estimated earnings before interest and taxes (EBIT) margin for that year has been adjusted downward by 290 basis points to 12.3%, compared to the former expectation of 14.6%. For fiscal year 2026, the analysts project a 2.0% decrease in sales, a stark contrast to the 4.3% growth previously estimated. The EBIT margin for the same year is also expected to decline by 230 basis points to 10.0%, a reduction from the earlier forecast of 14.6%.
Despite the substantial downward revision of estimates, the Citi analysts expressed a belief that the current market sentiment towards Abercrombie & Fitch might be overly pessimistic. They noted that the stock had declined by 12% over the past week, which they interpret as an indication that the market's view may be more negative than their analysis suggests. Consequently, they view the current levels as presenting a favorable risk/reward scenario for investors.
In other recent news, Abercrombie & Fitch reported a robust revenue growth of 15.6% in fiscal 2024, continuing its upward trajectory from the previous year. S&P Global Ratings revised its outlook for the company to positive, citing improved sales and profitability driven by transformation initiatives. The company's adjusted EBITDA expanded by over 30% to approximately $1.2 billion, with digital channels accounting for nearly half of sales, optimizing store productivity and margins. Analysts have also adjusted their price targets for Abercrombie & Fitch. UBS cut its price target to $150 while maintaining a Buy rating, highlighting the company's strong standing in the U.S. Specialty Retail sector. Citi reduced its target to $135, also retaining a Buy rating, noting strong sales but weaker gross margins due to promotions and freight costs. JPMorgan lowered its target to $168, keeping an Overweight rating, and emphasized the brand's expanded appeal and potential for international growth. Jefferies decreased its target to $170, maintaining a Buy rating, and expressed confidence in the company's long-term profitability prospects, despite recent inventory challenges.
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