Finding Meaning At The Mall With Wells Fargo

In a report published Wednesday, Wells Fargo analyst Lejuez gave an analysis of the retail sector, while specifically mentioning

,

and

. In the report Wells Fargo noted, "There are lots of mall checkers out there. Some focus on traffic, some focus on promotions, some feel the fabrics. Now we don't claim to be able to walk into a store and tell the difference between a +2% comp and a down 2% comp. But often we see something that stands out and ties into something bigger picture about a company and/or strategy." "Translating what we see in a store into something meaningful to help form or support a stock thesis is where we find the most value in our mall checks," Lejuez wrote. Urban Outfitters: "Following a Fall season where we thought many stores lacked color and optimism (a negative), we found it interesting that the Spring color palette at UO is darker than the rest of the mall (actually looks more like Fall than Spring in our view). We believe the darker color palette is part of URBN's strategy to try to attract an older customer at UO with a more sophisticated (less playful) assortment." "While we would have expected to see more color for Spring, UO has definitely done a good job differentiating itself from the other teen retailers in the mall. And based on comments from its Q4 conference call, it seems to be working. URBN mgmt spoke more positively about the turn in trends at UO than we have heard in a long time," the analyst said. L Brands: "In early 2013, BBW began promoting 3-wick candles at 2/$22 (previously 2/$20). Last month it moved to 2/$24 and this past weekend was the second time we saw the 2/$24 pricing. Why are we talking about candles?" "Well, it tells us a few things we believe are important in understanding the LB story: (1) They have strong analytics that help them adjust pricing based on what customers will pay, (2) Though many investors push back on their ability to raise prices, they are demonstrating pricing power, unlike most mall retailers, (3) While many appreciate the strength of the VS brand, some don't fully appreciate the BBW franchise and the EBIT margins it achieves, which are higher than VS, (4) If higher prices stick, LB should continue to see a comp tailwind," Lejuez explained. The Gap: "Though GPS mgmt spoke of port disruption causing inventory delays at Old Navy, our checks showed Old Navy has plenty of inventory currently, likely due to the lower than plan February comp." "While the largest volume week in March should be week 5, there are few empty shelves in Old Navy stores at present. Having said that, even if inventory becomes more lean, we note that inventory was even leaner throughout Dec (following a strong Nov) and Old Navy posted a +8% comp in December," the analyst added.