In a note to clients today, UBS Securities analyst Roxanne Meyer picks over the results of yesterday’s August retail report, and finds reason for cheer.
(For my view on the retailers, see yesterday’s Barron’s Take, “Retail Picks and Pans.”)
The better-than-expected results for same-store sales during the first month of back-to-school season suggest to her that the stronger retailers can see upside to earnings estimates come reporting season, writes Meyer. September will be important, as the back-to-school selling season extends from August into this month.
Retailers such as Aeropostale (ARO) can get as much as 45% of annual sales from these two months. The Gap (GPS) did well selling to kids with its Old Navy brand, she observes, while the “Born to Fit” denim campaign is “gaining traction” without increasing unit sales. Meyer expects margins will hold up, leading to possible EPS outperformance. She sees Zumiez’s (ZUMZ) earnings holding up for Q3. American Eagle (AEO) needs to show better “traction” in women’s apparel, Meyer opines.
As for Abercrombie & Fitch (ANF), its same-store sales decline of 5% from July show the store’s efforts to lower prices and provide better selection aren’t working.
Today, Abercrombie & Fitch shares are down $1.53, or 5%, at $29.45. As I mentioned earlier, Citigroup cut the stock to “Sell” this morning.
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