Brean Capital reiterates a Buy rating and $4 price target on New York & Co (NYSE: NWY) following Q1 results. Analyst Liz Pierce says that despite weaker-than-expected results, Q2 is off to a strong start, and the turnaround is happening. Q2 guided operating income between $1-$2M

Pierce commented on NWY, saying, "Yesterday NWY reported non-GAAP EPS of ($0.03), while missing our/Street estimate of flat earnings, there were several positive data points including total sales and comparable store sales up 2% and 1.8% respectively. Moreover, traffic was up for the total company for the fourth consecutive quarter and up for the second consecutive quarter at core NYCO stores, which is impressive given the declining traffic trends reported by most other retailers. Gross margin was also up, ~50 bps to 28.8%, which we believe validates the merchandising and marketing changes put into place over the past couple of years. Excluding depreciation, SG&A was up 260 bps to 27.8% and just modestly higher than our estimate. Included in SG&A was $2.9 million of non-operating expense related to the reengineering of NWY’s business processes, $2.1 million of incremental marketing expense as well as higher rent and variable distribution expense, both of which will be ongoing given the new corporate headquarters and higher online sales penetration. While the re-engineering efforts are pressuring near-term results, they are expected to generate between $20 and $25 million in annualized savings once fully implemented in FY16; that said, a portion of the savings will be re-invested in various growth strategies."

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Shares of New York & Co closed at $2.49 yesterday.