Shares of Vera Bradley (VRA) and Abercrombie & Fitch (ANF) fell in afternoon trading after both stocks were downgraded to Sector Weight from Overweight by analysts at KeyBanc.

ANALYST SEES DOWNSIDE RISK TO VERA BRADLEY EARNINGS, PREFERS COACH: After the market close yesterday, KeyBanc analyst Edward Yruma downgraded Vera Bradley to Sector Weight from Overweight, saying he sees risk to the company's earnings. Yruma said he believes the brand's reboot has been successful, as reflected by the 20% year-over-year rise in shares. On the other hand, the analyst added that, with gross margins at their highest since 2010, sales need to rise in order to to drive earnings. Yruma lowered his fiscal 2016 EPS view for Vera Bradley to 85c from 91c, with the consensus view at 82c. Yruma said he prefers Coach (COH) in the handbag space, on which he maintains an Overweight rating. The analyst also maintains an Overweight rating on Kate Spade (KATE), but has some concerns that tourist pressure may be a continue overhang in the near-term.

WHAT'S NOTABLE VERA BRADLEY: On September 1, Vera Bradley posted higher than expected results for the second quarter, but forecast third quarter and fiscal year earnings below analysts' estimates. The company currently sees Q3 EPS of 22c-24c and fiscal year EPS of 88c-92c.

ABERCROMBIE & FITCH EARNINGS UNDER PRESSURE: Separately, KeyBanc analyst Jessica Schmidt downgraded Abercrombie & Fitch to Sector Weight from Overweight. Schmidt said the firm's proprietary promotional database and channel checks indicate that promotions at Abercrombie and, to a lesser extent, Hollister are up from last year and that such promotions, along with continued headwinds from the overstored teen space, soft consumer demand and ongoing weakness in tourism, will likely keep near-term earnings under pressure. Schmidt noted that while A&F has been working to minimize promotions and shift away from "all store %-off" promos, she has recently seen an increase. The analyst added that the company has been "aggressively" closing stores, though the overall teen space continues to be "overstored." Additionally, Schmidt said she expects that slower tourist spending will likely continue in the near- to medium-term.

WHAT'S NOTABLE A&F: Abercrombie & Fitch said in its last quarterly report that its comparable sales declined 4%, mainly due to significant traffic pressure in tourist locations. The company said it expects tourist locations will continue to weigh on the business.

PRICE ACTION: In afternoon trading, Vera Bradley fell 2.5% to $14.89 and Abercrombie & Fitch slipped 3% to $15.80.

OTHERS TO WATCH: Vera Bradley peers include Coach, Kate Spade and Michael Kors (KORS), while Abercrombie's peers include American Eagle Outfitters (AEO), Urban Outfitters (URBN) and Gap (GPS).