VOL. 123 | NO. 221 | Tuesday, November 11, 2008
Sector Snap: Specialty Apparel
NEW YORK (AP) - Shares of specialty apparel retailers were mixed Monday, ahead of several fiscal third-quarter earnings reports.
After many retailers reported dismal October sales in stores open at least on year, a key retail metric known as same-store sales, last week, analysts are pessimistic about third-quarter results. However, shares are down so much over the past several months, few expect retailers' stocks to fall a significant amount further.
Since the beginning of August, the Dow Jones Specialty Retailers index is down 25 percent, roughly in line with the Dow Jones Industrial Average's 24 percent drop.
"We expect weak results and soft fourth-quarter outlooks," said Jefferies & Co. analyst Randal Konik in a client note Monday. "However, with significant multiple contraction over the past three months, we do not see significant additional downside, near-term."
As specialty retailers begin to report this week, Konik predicts value-focused retailers such as Ross Stores Inc., TJX Cos., Aeropostale Inc. and American Eagle Outfitters Inc. will be among the best performers.
Meanwhile, Stifel Nicolaus analyst Richard Jaffe said in a note to investors that Urban Outfitters Inc. – which reports Thursday – will likely deliver relatively strong results, as customers are still willing to pay for its "appealing" merchandise despite the difficult economy. He rates the company "Hold."
He said Abercrombie & Fitch Co., which he rates "Buy," will likely report weaker results Friday, due to its decision to stick to higher price points amid a difficult economy.
"We believe management's strategy to protect their brand equity by avoiding promotions is the right decision, however, in the near term, it is resulting in reduced sales," Stifel wrote.
Retailer shares were mixed across the sector, however, amid a general market uptick, as investors reacted favorably to China's $586 billion stimulus plan.
In morning trading, Ross Stores shares fell 16 cents to $29.11; TJX Cos. shares gained 3 cents to $24.22; Abercrombie & Fitch drop 43 cents to $24.67;
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'>Chico's FAS Inc. rose 7 cents to $3; Gymboree Corp
. jumped 48 cents to $22.89.
Aeropostale Inc. nosedived $2.37, or 12 percent, to $17.37 after a Barclays analyst downgraded the company.
American Eagle Outfitters shares slipped 27 cents to $9.88.
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