UPDATE 1-Weak retail sales trend could continue in 2009: analyst

lunes 29 de septiembre de 2008 16:10 CEST

 (Recasts; adds details)
 Sept 29 (Reuters) - The sales trends for U.S. retailers
have dropped sharply in the last two weeks as consumers have
been rattled by the recent financial market fallout, and this
trend could continue well into next year, Thomas Weisel
Partners said.
 "We believe retailers are running out of ways to mitigate
weak sales after several quarters of inventory cuts and cost
reduction. We also expect product costs to be flat to up after
several years of decline. Thus, deleverage on negative comps
(same-store sales) next year could be significant," analyst Liz
Dunn wrote in a client note.
 Dunn said deteriorating employment situation, tightening
consumer credit and significantly higher home-heating prices
are the real issues plaguing consumers. Also, housing values
could take years to rebound, she added.
 Dunn said sales trends will rebound somewhat as Congress
approves the bailout plan. "However, the unease about housing
values and the safety of investments that arose from the
financial crisis will likely linger."
 The analyst downgraded clothing and home goods retailer
Urban Outfitters Inc (URBN.O: Cotización) to "market weight" and Kohl's
Corp (KSS.N: Cotización) to "underweight."
 Analyst Dunn said Urban Outfitters' downgrade was based on
valuation, but added that she did not see "anything wrong with
the story." The stock is up 27 percent year-to-date versus an
18 percent decline in the S&P 500 .SPX.
 The company can continue to deliver despite the struggles
other retailers are facing due to its superior fashion and
smaller footprint, she added.
 For Kohl's, a mid-priced retailer of apparel and home
goods, Dunn said the lack of newness in the department store
channel is a negative for the company, as the model is highly
dependent on newness.
 Dunn, however, upgraded Abercrombie & Fitch Co (ANF.N: Cotización) and
Coach Inc (COH.N: Cotización) to "overweight" and Coldwater Creek Inc
CWTR.O to "market weight."
 Shares of teen clothing retailer Abercrombie have been hit
hard recently as same-store sales have turned sharply negative
and fashion looks to be off target, Dunn said. Recent
management departures have fueled investor concerns, she added.
Abercrombie shares have lost 23 percent of their value in the
last one month.
 However, the opening of the surf-inspired Hollister chain
in the UK and the hiring of a new finance chief are both
positive catalysts for the stock over the next three months,
Dunn said.
 Handbag maker Coach's shares have also been under
significant pressure given investors' concerns regarding
high-end and accessible luxury, Dunn said. Coach stock has shed
7 percent of its value in the past one month. "We do think
luxury is suffering, but we think those concerns are priced
 On Coldwater Creek Inc CWTR.O, Dunn said the women's
apparel retailer has been aggressive about cutting inventory
and reducing costs. It has beat consensus estimates in the last
two quarters and appears conservatively positioned on inventory
and costs for the back half, she added.
 Following are Thomas Weisel's ratings and price targets on
the retailers: COMPANIES                   RATING              
                Current         Prior            Current  
Prior Urban Outfitters   Market weight   Overweight        $40 
 $40 Kohl's Corp        Underweight     Market weight    
$40      $53 Abercrombie        Overweight      Market weight  
  $47      $56 Coach Inc          Overweight      Market weight
 $34      $30 Coldwater Creek    Market weight   Underweight
   $6       $6
 (Reporting by Dilipp S. Nag in Bangalore; Editing by Himani