Editor's Note: This content was originally published on
by Nelson Hem.
A new report by analysts at UBS suggests there may be little upside
ahead for department stores, due to such things as high inventories
and unfavorable weather in the first quarter. However, they feel
the prospects for some specialty retailers look more appealing.
Four of the stocks that made the UBS list of specialty retail
stocks to buy are
). My firm takes a glance at how these four stocks have fared and
what analysts expect below.
The UBS report also recommended some apparel makers to buy:
This retailer of women's wear and accessories lowered its
first-quarter sales outlook last week, but investors were pleased
by the outlook for May. Headquartered in New York City, ANN sports
a market capitalization of about $1.4 billion but offers no
The price-to-earnings (P/E) ratio is lower than the industry
average, and the long-term earnings per share (EPS) growth forecast
is more than 11%. The operating margin is better than the industry
average, and the return on equity is about 27%. Note that short
interest is more than 8% of the float.
Only four of the 14 analysts surveyed by Thomson/First Call who
follow this stock recommend buying shares. For the past three
months, the consensus recommendation has been to hold shares. The
mean price target, or where analysts expect the share price to go,
indicates less than 10% potential upside. The UBS target is 22%
higher than the current share price.
Shares of ANN are more than 15% higher than a year ago but down
more than 5% year-to-date. Over the past six months, the stock has
underperformed the broader markets and the other retailers featured
This retailer of athletic footwear and apparel said last week that
it will buy the German shore store chain Runners Point, and this
week it declared a quarterly dividend. Foot Locker offers a
dividend yield near 2.2%, and its market cap is about $5.5 billion.
The long-term EPS growth forecast is about 11%, and the P/E ratio
is less than the industry average. The operating margin is less
than the industry average too, though the return on equity is more
than 17%. Short interest is more than one percent of the float.
Of the 18 analysts surveyed, 12 recommend buying shares, with six
of those rating the stock at Strong Buy. The mean price target
implies more than 8% potential upside relative to the current share
price. But note that the UBS target suggests only about 6% upside.
Shares are trading more than 15% higher than they were at the
beginning of the year, including a rise of more than 9% in the past
month. Over the past six months, this stock has outperformed the
broader markets and competitor
This operator of off-price apparel and home fashion stores posted
strong sales numbers for April and is expected to show revenue
growth of about 7% in next week's first-quarter report. This
Pleasanton, California-based retailer has a market cap of near
$14.5 billion. The dividend yield is about 1%.
The P/E ratio is lower than the industry average and the long-term
EPS growth forecast is about 12%. Ross Stores has a return on
equity of more than 48% and the operating margin is greater than
the industry average. The number of shares sold short represents
about 1% of the company's float.
More than half of the 27 analysts polled recommend buying shares,
while none rate the stock at Underperform or Sell. The analysts
believe shares have little head room, as their price target is only
about 2% higher than the current share price. But UBS sees about
12% potential upside.
The share price is up more than 21% year-to-date, though it has not
yet recaptured the 52-week high from last August. The stock has
narrowly outperformed peer TJX over the past six months, as well as
the broader markets.
The operator of TJ Maxx, HomeGoods, and other chains is expected to
post double-digit percentage EPS growth for the most recent quarter
when it reports next week. The share price hit a multiyear high
yesterday. The company has a more than $37 billion market cap and
about a 1.1% dividend yield.
The P/E ratio is a lower than the industry average, and the
long-term EPS growth forecast is more than 11%. The operating
margin is greater than the industry average, and the return on
equity is more than 55 percent. The short interest is less than 1%
of the float.
Out of 27 surveyed analysts, 18 recommend buying shares, and none
rates the stock at Underperform or Sell. The share price has
overrun the mean price target, and the UBS target represents just
3% potential upside. Note though that a positive earnings surprise
or rosy guidance next week could raise price targets.
Shares are trading almost 20% higher than at the beginning of the
year. More than half of that gain has come in the past month. Over
the past six months, the stock has outperformed
(WMT), but its performance has been in line with the broader
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