BTIG starts Abercrombie at Buy, American Eagle at Neutral

Investing.com -- BTIG began coverage of apparel retailers Abercrombie&Fitch and American Eagle Outfitters, taking a more bullish stance on Abercrombie’s turnaround prospects while holding back on American Eagle given growth limits.

Analysts initiated Abercrombie with a Buy rating and a $120 price target, saying the company’s namesake brand has staged one of retail’s strongest comebacks, with sales up 75% from pre-pandemic levels despite store closures.

Analysts said the next leg of growth could come from applying the same merchandising and marketing strategy to Hollister, which accounts for nearly half of revenue, and from international markets now “right-sized” for expansion.

BTIG said Abercrombie’s comps have recently slipped into negative territory, but traffic trends remain strong, and pricing pressures that dragged results lower are within management’s control.

Product catalysts such as new denim cycles, western-inspired styles and fresh partnerships could support a return to growth, the firm said.

Whereas American Eagle was rated Neutral. BTIG said its core AE brand, which generates about 60% of sales, has matured, with revenue largely flat against 2019 levels.

Aerie remains a growth engine after nearly a decade of double-digit expansion, but at its current $2 billion scale, execution risks are higher.

The firm said American Eagle’s recent rebound in margins owes partly to one-off factors, while visibility on sustained comp growth remains limited in a tougher consumer environment.

Valuation also looks stretched after the stock’s run-up on better-than-expected quarterly results, leaving BTIG cautious on near-term upside.

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