Oppenheimer Highlights Key Specialty Retailers For '16

In a new report, Oppenheimer analyst Anna Andreeva took a look at retailing and apparel stocks headed into 2016. While Oppenheimer does see opportunity for some 2015 laggards to outperform in 2016, Andreeva believes the best opportunity for traders is to stick with the strong brands.

Estimates Too High

According to Andreeva, after three straight years of flat to down earnings, consensus expectations of 10 percent retail earnings growth in 2016 are too high. Oppenheimer is 5-7 percent below consensus estimates on most retailers in 2016.

Andreeva named Gap Inc GPS, Urban Outfitters, Inc. URBN, Chico’s FAS, Inc. CHS and Fossil Group Inc FOSL as the four names with the most 2015 earnings risk.

Leading Brands

Oppenheimer predicts volatility in the fashion apparel space in 2016, and urges traders to stick to brands with leading market share and limited international risk exposure. "Over the last five years, ‘brand’ stocks have outperformed SPX and our OPCO universe by 20%; after [a] difficult ’15, we think investor appetite toward picking laggards is more muted, making sticking with winners strategy obvious but appealing," Andreeva explained.

Related Link: Jefferies On Retail: Here Are The Best Ways To Invest In '16

Outlook

For now, Oppenheimer will be watching for holiday sales updates from American Eagle Outfitters AEO, Urban Outfitters and Childrens Place Inc PLCE sometime in the first week in January.

Oppenheimer's top picks for 2016 include brand names Hanesbrands Inc. HBI and Lululemon Athletica Inc. LULU and turnaround story Coach Inc COH. The firm also upgraded Abercrombie & Fitch Co. ANF to Outperform.

Disclosure: the author holds no position in the stocks mentioned.