Citi downgrades Abercrombie & Fitch and Urban Outfitters on tariff risks into Q2 results

[Abercrombie and Fitch]
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Shares of Abercrombie & Fitch (NYSE:ANF [https://seekingalpha.com/symbol/ANF]) were trading lower on Wednesday after Citigroup analyst Paul Lejuez assumed a more cautious view of the stock heading into Q2 results next week.

While Lejuez expects the specialty retailer to beat second quarter estimates thanks to strong sales at its Hollister banner, margins could be pressured by incremental tariffs as retailers in this space have fewer parties to share the tariff burden.

“We believe this makes for a tough setup over the next several months, especially against the strong 2024 holiday season,” Lejuez says in his note to clients.

Lejuez also expects Abercrombie & Fitch (NYSE:ANF [https://seekingalpha.com/symbol/ANF]) to lower FY25 EPS guidance to a range of $9.00 to $11.00 versus a consensus of $10.15 to incorporate higher tariffs with the majority of the impact hitting in the final quarter of the year and extend into 2026, driving Citi’s FY26 EPS guidance to $10.04 (versus $10.63 consensus).

The analyst downgraded Abercrombie & Fitch (NYSE:ANF [https://seekingalpha.com/symbol/ANF]) to Neutral from Buy, with a $105 price target.

Lejuez also downgraded Urban Outfitters (NASDAQ:URBN [https://seekingalpha.com/symbol/URBN]) amid a more cautious view on specialty retailers into the second half of the year. Like Abercrombie & Fitch (NYSE:ANF [https://seekingalpha.com/symbol/ANF]), Urban Outfitters (NASDAQ:URBN [https://seekingalpha.com/symbol/URBN]) faces tariff uncertainty.

“We believe specialty apparel retailers are going to be challenged to offset tariff pressures with higher prices (as historically this group has lacked pricing power),” Lejuez writes in his note to clients, seeing little room for Urban Outfitters (NASDAQ:URBN [https://seekingalpha.com/symbol/URBN]) to raise FY25 guidance.

While Urban Outfitters (NASDAQ:URBN [https://seekingalpha.com/symbol/URBN]) will navigate the tariff landscape better than other retailers, with shares trading at a FY25E P/E multiple of 15x, risk/reward appears more balanced.

Lejuez also downgraded Urban Outfitters (URBN [https://seekingalpha.com/symbol/URBN]) to Neutral from Buy and increased his target price by a dollar to $76.

MORE ON ABERCROMBIE & FITCH CO., URBAN OUTFITTERS

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