Abercrombie & Fitch Gets a Downgrade from JPMorgan

Shares of Abercrombie and Fitch weren’t looking so great on Thursday after JPMorgan decided to slash its rating on the apparel company.

The firm downgraded the stock from “neutral” to “underweight” and even slashed its price target from $12 to $10.

JPMorgan analysts wrote, “Management sees no silver bullets to sustainable operating profit expansion citing top-line growth as the primary go-forward seeing factor with continued SG&A efficiency to fund the rising cost of relevance given material cost saving ‘buckets’ in the rearview mirror.”

The company’s CEO Fran Horowitz has told the firm that investments in supply chains, as well as updated systems could improve the company’s top-line trajectory but JPMorgan didn’t seem convinced.

Analyst Matthew Boss wrote that the company’s top-line fell in fiscal 2016 to $3.3 billion from $4.5 billion in fiscal 2012 due to “self-inflicted factors.”

He also wrote, “ANF’s earnings power going forward is increasingly dependent on the company’s ability to drive positive comps which appears increasingly too difficult in the worsening retail backdrop. We are not convinced that ANF will see an inflection point in comps on a sustainable basis and see consistent EBITDA declines for the years ahead.”

Disclaimer: We have no position in Abercrombie & Fitch Co. (NYSE: ANF) and have not been compensated for this article.