NEW YORK, April 11 (Reuters) - Teen clothing retailer Abercrombie & Fitch Co may be overvalued by investors who expect new foreign stores to offset losses at a fifth of its U.S. stores, and have also overrated teenagers' appetites for buying new outfits, financial weekly Barron's said.
The paper reported in its April 12 edition that some investors believe the opening of higher-margin international stores will grow to 20 percent of operating income by 2011.
It said Abercrombie trades at $50 a share, or 28 times 2010 profits, its highest multiple in a decade and one of the highest among the 'overpriced' teen retailers.
The paper quotes Brian Sozzi of Wall Street Strategies saying of Abercrombie stock: 'In our view the product is just not turning the corner as quickly as management wishes.'
Barron's said other teen retailers like Hot Topic and Zumiez are trading at 30 and 36 times projected profits.
It expects that the high price-earnings ratios will come down as profits rebound and teens start buying again though Barron's is not sure that will be enough.
'How many plaid shirts and skinny destroyed jeans can (teens) buy?' the paper asked.
(Reporting by Yinka Adegoke, editing by Maureen Bavdek) Keywords: ABERCROMBIEFITCH/ (email: yinka.adegoke@thomsonreuters.com; tel: +1 646 223 6000) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The paper reported in its April 12 edition that some investors believe the opening of higher-margin international stores will grow to 20 percent of operating income by 2011.
It said Abercrombie trades at $50 a share, or 28 times 2010 profits, its highest multiple in a decade and one of the highest among the 'overpriced' teen retailers.
The paper quotes Brian Sozzi of Wall Street Strategies saying of Abercrombie stock: 'In our view the product is just not turning the corner as quickly as management wishes.'
Barron's said other teen retailers like Hot Topic and Zumiez are trading at 30 and 36 times projected profits.
It expects that the high price-earnings ratios will come down as profits rebound and teens start buying again though Barron's is not sure that will be enough.
'How many plaid shirts and skinny destroyed jeans can (teens) buy?' the paper asked.
(Reporting by Yinka Adegoke, editing by Maureen Bavdek) Keywords: ABERCROMBIEFITCH/ (email: yinka.adegoke@thomsonreuters.com; tel: +1 646 223 6000) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.