Barclays U.S. Retail Hardlines: Old Age: Embrace It, Don't Fight It
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Rating Summary:
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Today's Overall Ratings:
Up: 12 | Down: 9 | New: 14
Rating Summary:
27 Buy, 10 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 12 | Down: 9 | New: 14
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Barclays U.S. Retail Hardlines: Old Age: Embrace It, Don't Fight It
Barclays analyst says, "We initiate coverage of the U.S. Retail Hardlines industry with a Neutral rating. Our coverage of 17 names includes 1-Overweight ratings on AutoZone (NYSE: AZO), Bed Bath & Beyond (Nasdaq: BBBY), Home Depot (NYSE: HD), O'Reilly (Nasdaq: ORLY), PetSmart (Nasdaq: PETM), Pier One (NYSE: PIR), Tractor Supply (Nasdaq: TSCO), and William Sonoma (NYSE: WSM). We rate Advanced Auto (NYSE: AAP), Best Buy (NYSE: BBY), hhgregg (NYSE: HGG), Lowe's (NYSE: LOW), and Staples (Nasdaq: SPLS) Equal Weight. We rate Barnes & Noble (NYSE: BKS), Office Depot (NYSE: ODP), OfficeMax (NYSE: OMX), and RadioShack (NYSE: RSH) Underweight. We are non-consensus on ten ratings, including all four of our 3-Underweights (BKS, OMX, ODP, and RSH). Our Overweight rated top picks within the sector include AZO, BBBY, ORLY, PETM, and TSCO. We are more optimistic on the prospects for auto parts, home furnishings, and home improvement, while less optimistic on consumer electronics and office products."
"Old age isn't quite so bad, as long as it is embraced. Over the long term, largely due to the maturity of U.S. Hardline Retail, we are more cautious in our outlook. We believe that more retailers, many of whom are far along their respective maturity curve, need to embrace non-traditional means of enhancing shareholder value. In our view, a point is reached where incremental footage growth yields diminishing returns. We believe at this point greater emphasis on ROIC and payout ratio is necessary, not square footage growth. We believe international expansion (beyond Canada) is risky, as is development/rollout of secondary concepts, as the retail landscape is littered with retailers who have tried and failed in this regard. With few exceptions, we believe a sectorwide downsizing of both the number of and average size of many retailers' stores is necessary in an effort to boost profitability. Furthermore, over the long term, we are increasingly concerned about the effects of eCommerce retailers, particularly Amazon, who are advantageously positioned to capture a disproportionate share of consumers' desire to shop online via mobile devices."
"Over the short term despite clear headwinds of rising gasoline prices, we are more polarized on the prospects for the U.S. consumer. Near term, we endorse lower cyclical, defensive names. We believe that the worst of the housing crisis is now firmly behind us. While not every housing variable is ideal currently, sequential improvements in many housing metrics makes us incrementally more positive on the housing backdrop. Housing metrics need not improve in absolute terms; they only need to incrementally improve. Rising GDP levels relative to 2010, coupled with improvement in the employment picture over the past 18 months, have paved the way for improving consumer sentiment. This is evident in improving same-store sales within auto parts, home furnishings, and home improvement."
Barclays analyst says, "We initiate coverage of the U.S. Retail Hardlines industry with a Neutral rating. Our coverage of 17 names includes 1-Overweight ratings on AutoZone (NYSE: AZO), Bed Bath & Beyond (Nasdaq: BBBY), Home Depot (NYSE: HD), O'Reilly (Nasdaq: ORLY), PetSmart (Nasdaq: PETM), Pier One (NYSE: PIR), Tractor Supply (Nasdaq: TSCO), and William Sonoma (NYSE: WSM). We rate Advanced Auto (NYSE: AAP), Best Buy (NYSE: BBY), hhgregg (NYSE: HGG), Lowe's (NYSE: LOW), and Staples (Nasdaq: SPLS) Equal Weight. We rate Barnes & Noble (NYSE: BKS), Office Depot (NYSE: ODP), OfficeMax (NYSE: OMX), and RadioShack (NYSE: RSH) Underweight. We are non-consensus on ten ratings, including all four of our 3-Underweights (BKS, OMX, ODP, and RSH). Our Overweight rated top picks within the sector include AZO, BBBY, ORLY, PETM, and TSCO. We are more optimistic on the prospects for auto parts, home furnishings, and home improvement, while less optimistic on consumer electronics and office products."
"Old age isn't quite so bad, as long as it is embraced. Over the long term, largely due to the maturity of U.S. Hardline Retail, we are more cautious in our outlook. We believe that more retailers, many of whom are far along their respective maturity curve, need to embrace non-traditional means of enhancing shareholder value. In our view, a point is reached where incremental footage growth yields diminishing returns. We believe at this point greater emphasis on ROIC and payout ratio is necessary, not square footage growth. We believe international expansion (beyond Canada) is risky, as is development/rollout of secondary concepts, as the retail landscape is littered with retailers who have tried and failed in this regard. With few exceptions, we believe a sectorwide downsizing of both the number of and average size of many retailers' stores is necessary in an effort to boost profitability. Furthermore, over the long term, we are increasingly concerned about the effects of eCommerce retailers, particularly Amazon, who are advantageously positioned to capture a disproportionate share of consumers' desire to shop online via mobile devices."
"Over the short term despite clear headwinds of rising gasoline prices, we are more polarized on the prospects for the U.S. consumer. Near term, we endorse lower cyclical, defensive names. We believe that the worst of the housing crisis is now firmly behind us. While not every housing variable is ideal currently, sequential improvements in many housing metrics makes us incrementally more positive on the housing backdrop. Housing metrics need not improve in absolute terms; they only need to incrementally improve. Rising GDP levels relative to 2010, coupled with improvement in the employment picture over the past 18 months, have paved the way for improving consumer sentiment. This is evident in improving same-store sales within auto parts, home furnishings, and home improvement."
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