Jefferies Raises Price Targets on Specialty Retail Stocks

Jefferies raised its price target on a number of specialty retail names, saying they remain "super bullish" and still see significant upside ahead.

The firm's top 10 reasons they remain bullish are:

1. Cotton Tailwinds. Cotton prices are down significantly at 90c/lb. vs. peak of >$2/lb.
   
2. Inventories Under Control. We think the retailers have done a good job entering 2012
   with clean inventories which should help the margin picture.
   
3. Easy Margin Compares. Retailers GM% contracted ~150bp during 2011 on average.
   
4. Consumer Sentiment Improving. Consumer sentiment is improving helped by stock
   market gains and slowly improving job and housing markets.
   
5. Sales Trends Are Improving. Sales trends have been strong thus far in early spring.
   
6. Earnings Estimates Are Too Low. Our estimates are Street high for many companies
   and we think our estimates could eventually prove conservative.
   
7. Sentiment Too Negative. Over 60% of the retailers have more Hold/Sell ratings than
   Buy ratings; going forward, we expect an upgrade cycle.
   
8. Stocks Are Under-Owned. From our travels it is clear this group is under-owned.
   
9. Strong Balance Sheet and Cash Flows. Most retailers have strong balance sheets
   and little or no debt (ex-leases) as well as solid cash generation.
   
10. Valuation Still Compelling. Valuation remains attractive at 19x FY'13 EPS and 9x
    EBITDA, roughly in line with the historical averages despite the meaningful tailwinds

Price Target Changes:

• Abercrombie & Fitch (NYSE: ANF) (Buy) from $70 to $75
  
• Aeropostale, Inc (NYSE: ARO) (Buy) from $24 to $27
  
• American Eagle Outfitters, Inc. (NYSE: AEO) (Buy) from $21 to $23
  
• Body Central Corp. (NASDAQ: BODY) (Buy) from $35 to $36
  
• Ann Inc. (NYSE: ANN) (Buy) from $31 to $33
  
• Coach, Inc. (NYSE: COH) (Buy) from $90 to $92
  
• Francesca's Holdings (NASDAQ: FRAN) from $35 to $38
  
• Ross Stores, Inc. (NASDAQ: ROST) (Hold) from $60 to $62
  
• rue21 (NASDAQ: RUE) (Hold) from $27 to $28
  
• The Gap, Inc. (NYSE: GPS) (Buy) from $35 to $37
  
• The TJX Companies, Inc. (NYSE: TJX) (Hold) from $35 to $40
  
• Ulta Beauty (NASDAQ: ULTA) (Hold) from $90 to $92.
  
• Zumiez (NASDAQ: ZUMZ) (Hold) from $27 to $35
  
• Limited Brands (NYSE: LTD) (Hold) from $42 to $45

For an analyst ratings summary and ratings history on Abercrombie & Fitch click here. For more ratings news on Abercrombie & Fitch click here.

Shares of Abercrombie & Fitch closed at $51.23 yesterday.

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