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Evercore ISI sees pockets of opportunity in these 5 retail names

November 8, 2023 9:50 AM EST
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Evercore ISI revealed the retail stocks it sees performing well over the next 12 months in a note to clients this week, initiating 12 with an Outperform rating. The Wall Street firm also started a further nine stocks with In Line ratings.

The firm acknowledged the current challenging retail macro environment but said it sees pockets of opportunity in the sector. It stated that TJX Cos (NYSE: TJX), PVH Corp. (NYSE: PVH), Lululemon Athletica (NASDAQ: LULU), Ulta Beauty (NASDAQ: ULTA), and Gap, Inc. (NYSE: GPS) are its top Outperform ratings.

They explained they have prioritized stocks with strong defensive characteristics, a clear track record of execution outperformance, structural/scale advantages and visible sources of self-help "to drive P&L upside until the macro path is clearer."

TJX, which was assigned a $105 target, has the "best off-price execution" and multiple paths to share gains, the firm stated. In addition, it noted the company's under-earning segments, store remodeling tailwinds, and the fact that SG&A pressure is easing.

A $100 per share price target was assigned to PVH, with Evercore saying the "deep value stock poised [is] to unlock significant pent-up margin power as it integrates its patchwork of legacy license businesses."

LULU is the most consistent high-growth story in the space and is set to benefit from multiple years of heavy reinvestment back into innovation, customer experience, and global sources of growth, according to Evercore, which has a $475 price target on the stock.

ULTA was given a $460 price target. The firm stated that it has the "best access to the US Beauty category's enviable growth/profit characteristics." In addition, they pointed to the company's visible market share sources and that its "best hi-low pricing strategy drives a compelling mix of offense/defense for the macro ahead."

GPS is high risk/high reward, according to Evercore ISI analysts. "Its P&L heavy lifting has been done," they wrote. "Consensus expects GPS to be the least profitable Specialty Retailer in the group next year. New CEO with a track record for reigniting wayward legacy brands." GPS shares were given a $17 price target.

The firm also assigned Nike (NYSE: NKE), On Holding AG (NYSE: ONON), Ralph Lauren (NYSE: RL), Ross Stores (NASDAQ: ROST), Burlington Stores (NYSE: BURL), Ferrari N.V (NYSE: RACE), and Birkenstock (NYSE: BIRK) at Outperform. Meanwhile, Tapestry (NYSE: TPR), Foot Locker (NYSE: FL), Under Armour (NYSE: UA) (which reported earnings today), Nordstrom (NYSE: JWN), Macy's (NYSE: M), Kohl's (NYSE: KSS), Revolve Group (NYSE: RVLV), V.F. Corp. (NYSE: VFC), and Canada Goose (NYSE: GOOS) were assigned In Line ratings.

By Sam Boughedda



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