Buy Dollar Tree; Sell Kohl's, Sears & Target Says S&P Capital IQ Analyst - Dollar Tree (NASDAQ:DLTR), Kohl's (NYSE:KSS)

The holiday season is over and things are going back to normal for retailers. Efraim Levy from S&P Capital IQ, was on CNBC to discuss the problem e-retailers are experiencing currently and his firm’s rating on big-tier retailers including Dollar Tree, Inc. DLTR, Kohl's Corporation KSS, Sears Holdings Corp SHLD and Target Corporation TGT.

On The Upside Of Online Retail

In discussing online versus in-store retail, Levy said, “One thing that is going to eat into margins though is a lot of these shipping costs from the online sales. Online sales have been a big factor for the industry growth.”

He explained, “So, you may have lower sales in-stores, but you can make it up for online, but when you have to ship for free that’s going to impact your margins.”

On Dollar Tree's 'Buy' Rating

In discussing most retailer's "Hold" trend against Dollar Tree's "Buy," Levy said, “Well, the holds are based on valuation.The fundamental backdrop right now is pretty good for the season.”

He continued, “You had lower gas prices, higher stock market, improving jobs, consumer confidence -- so that’s good, but you also have bifurcated market, so, you have the high-end winning and you also have the low-end winning. Where people who are doing poorly, they have to go to the lower priced value stores like a Dollar Tree and that’s helping them expand -- they are growing rapidly in terms of putting out more products to sell. That grows sale and are also expanding the number of stores.”

On 'Sell' Rated Retailers

Levy discussed the other end of the spectrum as well “There are companies like Sears that we have a ‘Sell’ on; we have Kohl’s, it is also a sell […] Sears is bordering on irrelevance if you can say it for a company with that many billions of dollars of sale, but the trend is negative there.”

On Target As A ‘Sell’

Levy explained that Target's rating is due to something different than Kohl's and Sears. “Well, Target is well above our target price. So, they have been working to make that turnaround.”

“The valuation: we don’t think it’s there,” Levy added.

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