Abercrombie & Fitch (ANF) has struggled so far in 2012, rising about 1.6% before today, versus a 19% jump for the S&P Retailing Index. The company’s fourth quarter results were disappointing and the company appeared to be carrying too much inventory.
But Brean Murray Carret analyst Eric Beder thinks Abercrombie has turned a corner, leaving its problems in the past.
“We believe strong February and March results have allowed Abercrombie to materially improve their inventory positions. One of our major fears was that the company would continue to underperform under the weight of an over 40% increase in inventory per square at the end of 4QFY12. With record warm weather in March, we are seeing the return of out of stocks on key seasonal items such as denim, and material progress on clearing out left over winter goods.”
A turnaround in sales could have an outsize ? on the stock, because it has been so beaten-down. It is “by far” the cheapest among its peers, trading at 9.6 times.
“Frankly, this situation makes no sense to us and reflects what we view as exaggerated belief in an unproven turnaround (and new management) at American Eagle (AEO) and the Street ?penalty? on Abercrombie & Fitch for missing 4QFY12 and being too aggressive in their FY13 initial guidance.”
Beder raised his rating to Buy and upped his price target to $65.
Abercrombie shares rose 5% to $52.10 in afternoon trading.
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