Deutsche Bank Has Some Thoughts On Abercrombie & Fitch (ANF)

Deutsche Bank is out with a research report on Abercrombie & Fitch ANF after the teen clothing retailer reported earnings last week. It has a $40 price target and a Neutral rating on the shares. In the research sent to clients, Deutsche Bank writes, "ANF put up better-than-expected 2Q EPS of $0.24 vs. $0.16 consensus. Relative to the Street, 2Q missed gross margin, but saw better exp. trends. While a nice Qtr., our overall caution on ANF remains, as we believe 2H10/2011 will see more product pricing pressure and higher product costs (sourcing/transportation) than currently expected by consensus. Also, significant inventory ramp poses out-sized markdown risk. On balance, with the closure of unproductive stores (currently and forthcoming) and LT OM potential, maintain Hold and $40 PT (18x our FY11E EPS)." Shares of Abercrombie & Fitch Co. gained 21 cents yesterday to close at $36.60.