Discounts Rise in Final Days of Holiday, Says Credit Suisse (GPS) (ANF) (M) (NKE) (UA)

Credit Suisse said in a research note Friday that discounting was elevated in the final days of the holiday. The report noted aggressive promotions in fashion retail, and less promotions at deep value retailers and at athletic brands.

Related stocks include ANN, Inc. (NYSE: ANN), Express (NYSE: EXPR), Abercrombie & Fitch (NYSE: ANF), L Brands (NYSE: LB), Gap, Inc. (NYSE: GPS), Macy's (NYSE: M), Under Armour (NYSE: UA), V.F. Corporation (NYSE: VFC), and Nike (NYSE: NKE).

"Our analysis of retailer promotional trends in the last four weeks of the holiday shopping season show: 1) exceptionally high levels of markdowns across fashion apparel concepts, 2) moderate discounting at "deep value" retailers and 3) limited promotional intensity across athletic brands and retailers. This helps validate our concerns about the fashion specialty retailers and leaves us increasingly cautious on potential earnings power for basics retailers like GPS and the teen sector, particularly ANF," said analyst Christian Buss.

"Specialty fashion apparel retailers have decided to promote heavily for the holidays, with many opting for 50% off promotions to help drive customers into store. Retailers such as Ann Taylor, Express, Abercrombie & Fitch, Hollister, and Victoria's Secret have all advertised promotions for half off products to help drive last minute shoppers into stores. Macy's also participated in the 50% off trend with half of the RTW offering promoted at 50% off during the company's "One Day Sale" the Friday before Christmas," continued the analyst.

"GPS brands, The Gap, Old Navy, and Athleta lead the pack of heavy promotions, advertising 60% off at their stores the week of Christmas. The Gap brand has particularity had an increasing promotional lead up to the holidays. Heading into Christmas week, promotions spiked from 30% off to 60% off at The Gap. We believe this heightened activity adds risk to GPS margins in the quarter," he added.

Buss said brands like Nike, Under Armour, and The North Face continue to sustain full price selling. In his view, this suggesting underlying demand continues to shift toward these categories.

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