(Corrects paragraph 12 to change Cowen analyst’s surname to Kernan, from Karnan)
Nov 6 (Reuters) - Abercrombie & Fitch Co’s shares were set to open around 7 percent lower after the teen fashion retailer reported sliding sales and slashed its profit outlook.
At least three analysts cut their price targets on A&F’s stock and others were looking for the company to explain its plans at an investor briefing later on Wednesday.
Known for its edgy marketing and buff young shop assistants, A&F has lost its way with younger shoppers, who have tired of its charms.
Even before Tuesday’s results, the company’s shares had shed a fifth of their value this year. They fell 15 percent in extended trading to a low of $32.63 before recouping some of their losses.
The company blamed weak spending among younger shoppers as it reported a double-digit drop in quarterly comparable store sales and more than halved its full-year adjusted profit forecast.
Brokerages including Jefferies, Cowen, and Brean Capital cut their price targets on the company’s stock by between $3 and $5 to as low as $33, citing weak sales and margin trends.
“While the company is playing good defense by cutting expenses, this does little to revitalize what we believe is a stale brand,” Stifel Research analyst Richard Jaffe said.
Abercrombie, in a bid to cut costs to partially offset a highly promotional environment, said it would close all of its standalone Gilly Hicks stores, which sells lingerie for women.
“We believe this (Gilly) eliminates a distraction from the main task of improving productivity and profit margins in the core brands,” Dorothy Lakner of Topeka Capital Markets said in a note.
Additional steps, however, especially in merchandising and clothing design are needed, Jaffe wrote in the note.
Eric Beder of Brean Capital said the entire teen sector would remain under material pressure in the near term and he awaited further information at the investor presentation.
Beder cut his price target on the stock to $48 from $50, while Cowen’s John Kernan cut his price target to $33 from $36 on Wednesday.
Shares of Abercrombie’s key rivals, Aeropostale Inc and American Eagle Outfitters Inc, both traded around 4 percent lower in extended trading on Tuesday, amid fears they face the same pressure from weak youth spending.
Abercrombie shares ended extended trading at $35.50, down 7.3 percent from their close on Tuesday on the New York Stock Exchange. (Reporting by Aditi Shrivastava in Bangalore; Editing by Kirti Pandey)