UBS Monthly Retail Sales Wrap-Up: December a Let Down, Tough to Achieve Both Comp and Margin Gains in 1H12
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7 Buy, 9 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 7 | Down: 5 | New: 25
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UBS Monthly Retail Sales Wrap-Up: December a Let Down, Tough to Achieve Both Comp and Margin Gains in 1H12
Analyst, Roxanne Meyer, said, "Share gains continue at off-price; lowered Express (Nasdaq: EXPR) 4Q, tweaked Abercrombie & Fitch (NYSE: ANF) model: December comps were mixed and were more of a let-down than not, with the majority driving gains at the expense of margins. Our takeaway is that it is too soon to get more broadly constructive on the space, and that selectivity will likely be key for 1H12. The ability to drive comp and margin at the same time will be tough for most; ROST was the standout for December. Ross Stores (Nasdaq: ROST),TJX Cos (NYSE: TJX) and Limited (NYSE: LTD) in our view will continue to benefit from strong product execution, inventory management and shareholder initiatives. Give margin performance across the group, coupled with our December channel checks at EXPR which pointed to a slight increase in YOY promos, we are lowering our EXPR 4Q EPS estimate to $0.66 from $0.68. We now assume a flat gross margin (vs expectations for a modest increase) which would still be best in class. While we didn’t lower our below-Street estimate for ANF at $1.47, we tweaked our model to assume a slightly higher comp (4.5%) and lower gross margin (down 410 bp)."
"January compares mixed, but easier for off-pricers 2-year compares in January (vs December) are mixed with tougher compares at LTD (27 pts tougher; LY had 10 pt benefit from timing shift of sale) and The Gap (NYSE: GPS) (7 pts tougher). Compares are easier for the off-pricers: ROST (5 pts) and TJX (2 pts)."
"Estimate and price target changes - Lowering est: American Eagle (NYSE: AEO), EXPR (Q4), TJX (Q4), Urban Outfitters (Nasdaq: URBN) (Q4). Raising est: Aeropostale, Inc. (NYSE: ARO) (Q4), ANF (FY12), LTD, ROST. Raising price target: ROST, TLB."
Analyst, Roxanne Meyer, said, "Share gains continue at off-price; lowered Express (Nasdaq: EXPR) 4Q, tweaked Abercrombie & Fitch (NYSE: ANF) model: December comps were mixed and were more of a let-down than not, with the majority driving gains at the expense of margins. Our takeaway is that it is too soon to get more broadly constructive on the space, and that selectivity will likely be key for 1H12. The ability to drive comp and margin at the same time will be tough for most; ROST was the standout for December. Ross Stores (Nasdaq: ROST),TJX Cos (NYSE: TJX) and Limited (NYSE: LTD) in our view will continue to benefit from strong product execution, inventory management and shareholder initiatives. Give margin performance across the group, coupled with our December channel checks at EXPR which pointed to a slight increase in YOY promos, we are lowering our EXPR 4Q EPS estimate to $0.66 from $0.68. We now assume a flat gross margin (vs expectations for a modest increase) which would still be best in class. While we didn’t lower our below-Street estimate for ANF at $1.47, we tweaked our model to assume a slightly higher comp (4.5%) and lower gross margin (down 410 bp)."
"January compares mixed, but easier for off-pricers 2-year compares in January (vs December) are mixed with tougher compares at LTD (27 pts tougher; LY had 10 pt benefit from timing shift of sale) and The Gap (NYSE: GPS) (7 pts tougher). Compares are easier for the off-pricers: ROST (5 pts) and TJX (2 pts)."
"Estimate and price target changes - Lowering est: American Eagle (NYSE: AEO), EXPR (Q4), TJX (Q4), Urban Outfitters (Nasdaq: URBN) (Q4). Raising est: Aeropostale, Inc. (NYSE: ARO) (Q4), ANF (FY12), LTD, ROST. Raising price target: ROST, TLB."
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