Pain. That one word just about sums up how investors felt about retailing stocks after second-quarter earnings. Abercrombie & Fitch (ANF)? Down 22% during the past month. Aeropostale (ARO)? Off 30%. Urban Outfitters (URBN)? Down 3.4%.
Bloomberg News Those big drops were the result of disappointing earnings that have caused analysts to slash their forecasts across the board. It’s still not enough to make Sterne Agee analysts Ike Boruchow and Tom Nikic want to buy the entire sector wholesale. They explain:
Comparing today’s 2H Street estimates to forecasts made prior to Q2 earnings, one can see the fear that has been built into the group, as comp estimates have been cut by 150bp on average (to 2-3%) and OMs have been lowered by 120bps (to 14.6% - vs. 15.2% LY). 70% of retailers saw their 2H margin outlook cut by the Street -as there is low confidence in their ability to drive full-price selling into year end. The lowered bar likely presents a more-balanced risk-reward environment, but we continue to urge investors to stay selective…
10 Best Low Price Stocks To Own For 2014
Their recommendations: Buy Fifth & Pacific (FNP), L Brands (LTD), Urban Outfitters, Ross Stores (ROST) and the TJX Companies (TJX).
Fifth & Pacific has gained 0.6% to $24.98, L Brands has risen 1% to $59.56, Urban Outfitters has ticked up 0.1% to $34.82, Ross Stores has advanced 0.3% to $71.09 and the TJX Companies have gained 0.8% to $55.72.
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