Abercrombie & Fitch Faces Potential Sales Decline Amid Tariff Concerns

Raymond James analyst Rick Patel has advised investors in Abercrombie & Fitch (ANF.US) to prepare for potential challenges related to tariffs, warning that the company's sales may decline for the first time in eight quarters. Patel's analysis is based on various industry indicators, including store traffic, online promotional activities, and Google Trends data, which suggest a potential drop in sales and an increase in promotional activities. These factors could put pressure on the company's gross margin.

Despite the potential for disappointing quarterly results, the stock has already declined by 51% year-to-date, indicating that much of the negative news related to tariffs has already been priced in. Patel maintains a "buy" rating on Abercrombie & Fitch, viewing the current stock price as an attractive entry point if the company meets earnings expectations. However, he has lowered the target price for Abercrombie & Fitch to $90 per share, reflecting more cautious expectations and the stock's decline over the past six months.

Abercrombie & Fitch is scheduled to release its earnings report before the market opens on Wednesday. The company is expected to report adjusted earnings per share of $1.37 and revenue of $1.06 billion, compared to $2.14 per share and $1.0 billion in revenue for the same period last year. Over the past three months, earnings estimates have been revised downward six times and upward three times, while revenue estimates have been revised downward eight times with no upward revisions. In the previous quarter, although Abercrombie & Fitch exceeded earnings and revenue expectations, the company issued a cautious earnings outlook, leading to a 17% decline in its stock price.