Declining Tourism Weighed On Abercrombie's Q2 Results, Creating Positives For American Eagle Outfitters

Comments
Loading...
BMO said the weak second-quarter results of Abercrombie & Fitch Co. ANF on lower tourism spending are a positive for peer American Eagle Outfitters AEO.

Abercrombie & Fitch reported worse-than-expected earnings driven by weak tourism spending, which was mostly concentrated in the A&F brand. Also, the company missed key fashion trends in tops at both divisions, as it stayed on the boho bandwagon too long and did not transition to the popular off-shoulder styles.

"We see this as a positive read-through for AEO who has been on-trend in tops and continues to take share given the withdrawal of Aeropostale and PacSun," analyst John Morris wrote in a note.

Related Link: Abercrombie & Fitch Remains In Turnaround Mode

In addition, Morris said the company's guidance for the back half of the year implies continued weak traffic trends — primarily stemming from light tourism — and assumes higher marketing spend that in turn would hit operating margin.

However, the positives include management expectations for lower AUCs, higher AUR and a correction to its miss in tops.

That said, Morris maintains his Market Perform rating and cut his price target by $1 to $19. The analyst also trimmed his 2016 EPS estimate to $0.61 from $0.71 and 2017 estimate to $0.91 from $1.03.

"While we believe that there is a turnaround story for the company, we remain on the sidelines for now with our limited visibility on the pace of the core A&F division turnaround," Morris added.

At time of writing, shares of Abercrombie & Fitch fell 1.38 percent to $17.84, while shares of American Eagle were slightly up on the day, seen trading at $18.63 (up 0.32 percent).

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!
AEO Logo
AEOAmerican Eagle Outfitters Inc
$11.62-%

Stock Score Locked: Want to See it?

Benzinga Rankings give you vital metrics on any stock – anytime.

Reveal Full Score
Edge Rankings
Momentum8.38
Growth49.81
Quality-
Value93.82
Price Trend
Short
Medium
Long
Market News and Data brought to you by Benzinga APIs
Date
ticker
name
Actual EPS
EPS Surprise
Actual Rev
Rev Surprise

Posted In: