'Challenges Remain' For These Retailers After Black Friday, Oppenheimer Says - Abercrombie & Fitch (NYSE:ANF), American Eagle Outfitters (NYSE:AEO)

Anna Andreeva of Oppenheimer commented in a note that retailers began offering Black Friday-type sales as early as Friday, November 20 this year – resulting in lower than expected traffic levels on Black Friday.

The biggest winners, based on the analyst's store checks, were L Brands Inc LB, American Eagle Outfitters AEO and Abercrombie & Fitch Co. ANF.

On the other hand, the biggest losers were Gap Inc GPS, Chico's FAS, Inc. CHS and Carter's, Inc. CRI.

According to Anna Andreeva of Oppenheimer, many retailers opted for an early start to Black Friday-type sales, with some retailers beginning their sales a full week in advance.

Andreeva noted that her Black Friday checks in New Jersey and Virginia pointed to weaker mall traffic, although this could be due to an earlier start to sales, while online sales were likely up in the double-digits.

Andreeva continued that within the malls, "winners keep winning, losers keep losing." Those winners include L Brand's Victoria's Secret and Bath & Body Works stores (both having the highest level of observable traffic), American Eagle and Abercrombie & Fitch. On the other hand, The Gap, Chico's, and Carter's were forced to offer "significantly" deeper and longer promotions compared to last year.

Specialty Underperformance

After a "weak" third quarter for the specialty retailer group, the sector is still "lagging" in November. Andreeva suggested that "structural challenges" continue in the space – especially with apparel, as it was "no surprise" that non-apparel categories outperformed.

Andreeva further cautioned investors by pointing out that the specialty retailer group typical outperforms the S&P 500 (on average by around 300 basis points in the last five years), while December and January "more than erase gains." In fact, the strongest performers in the entire market during the fourth quarter are retailers least levered to the holiday shopping season.

Finally, the analyst pointed out that the 7 to 8 percent earnings per share growth that sell-side analysts were modeling just two weeks ago have since been revised to flat with the biggest downside revisions occurred at Chico's, Gap and Urban Outfitters, Inc. URBN.

The analyst even argued that a flat earnings per share profile is "optimistic," especially when factoring in an inventory build and three consecutive quarters of negative sales and inventory spread for the entire group.

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