Wedbush On Specialty Retail Following Holiday Weekend

• Shares of Express, Inc. EXPR and Gap Inc GPS are down 2 percent and percent respectively year-to-date, while Francesca's Holdings Corp FRAN shares are up 11 percent.
• Wedbush’s Morry Brown has Outperform ratings on both Express and Francesca's, and a Neutral rating on Gap.
• These specialty retailers witnessed healthy traffic during the Holiday weekend.

Francesca's

The company’s inventory levels have improved y/y. Positive trends continue, with a significant y/y decline in clearance inventories, analyst Morry Brown said. He wrote, “Select locations had less than half a rack of clearance (or none at all) pre-Christmas.”

The price target for Francesca's is at $19.

Gap

Old Navy and Banana Republic are driving traffic, with a y/y increase in promotions. Both the brands ramped promotions as compared to 2014, and “were successful at moving inventory over the weekend, but only at the cost of margin,” Brown noted.

Old Navy offered up to 75 percent off entire store in 2014, while this year it offered extra 20 percent off purchase and extra 30 percent off purchase with card.

Banana Republic offered up to 50 percent discount on entire store in 2014, while this year it offered 50 percent off one regular priced item and 40 percent off entire purchase.

The price target for Gap is at $27.

Express

The company witnessed strong traffic and conversion, even with promotional activity similar to last year. “Given less frequency of storewide promotions this year, we believe the 50% promotion spurred urgency from customers,” the analyst mentioned.

Inventory levels have declined significantly y/y, both in clearance and across the full price assortment. Express offered 50 percent off everything in 2014, while this year it offered 50 percent off everything excluding Express One Eleven and Edition.

The price target for Express is at $26.