Gap Inc. and Abercrombie & Fitch Co. shares fell about 1% on Friday after the stocks were cut to underperform from neutral by Credit Suisse. The two specialty apparel retailers still rely on the historical "high-low" pricing model, which has lost relevance in a world where "deep-value" retailers like Uniqlo, H&M, Zara and Forever 21 have found ways to sell at "everyday low" prices that are more appealing to consumers, said analyst Christian Buss. He said both companies also face mounting currency pressures from a stronger dollar. Meanwhile, the deflationary trend in the U.S. apparel sector will limit the sector's sales growth.
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