Is It All Doom And Gloom? Bernstein's Retail Sector Outlook

Outperform Ratings

• TJX Companies Inc TJX
• Tiffany & Co. TIF
• Lululemon Athletica inc. LULU
• Michael Kors Holdings Ltd KORS

Market-Perform Ratings

On the other hand, the experts believe the following retailers deserve a rating of Market-Perform:

• Ross Stores, Inc. ROST
• L Brands Inc LB
• Gap Inc GPS
• Coach Inc COH

Related Link: Enough Is Enough: Why This Analyst Upgraded Macy's To Buy After Sharp Downside

A Closer Look At Retail Behemoth Macy's

Macy’s recent third-quarter earnings call threw the retail space off balance again, especially with its comparable store sales down 3.6 percent. The company said the weak traffic was driven by a marked decline in international tourism in the United States, warm weather over the country and a shift in consumer spending towards other categories like autos and technology.

Bernstein retail index unperformed the S&P500 by roughly 200 bps, the research note assured, explaining that the poor performance was broad-based, and has led investors to expert “more misses and bad news going into the balance of retail earnings.”

Below are a few quick comments from Bernstein analysts in relation to this pullback:

• The consumer is (still) shifting away from department stores in the apparel segment, and moving towards two value segments: fast fashion and off-price.
• The consumer is in a pretty good position, as evidenced by consumption of discretionary brands like Victoria's Secret or L Brands.
• “However price / value expectations, especially when it comes to apparel, keep being challenged and redefined by value players.”
• “Warm weather” does not rank among the top fundamental drivers for Bernstein.
• Going into the second half of the year, the experts feel bullish on the off-price segment.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.