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Baird Is Iffy On Retail Ahead Of Q4 Results

Baird Is Iffy On Retail Ahead Of Q4 Results
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Investors will be looking for 2016 guidance in retail players' quarterly reports over the next few weeks as the sector comes off a disappointing holiday season, according to a note from Baird released Wednesday. Analyst Mark Altschwager offered an earnings preview for some of retail's biggest players ahead of their earnings reports this month.

Altschwager looked at estimated Q4 results for J C Penney Company Inc (NYSE: JCP), Nordstrom, Inc. (NYSE: JWN) and Kohl's Corporation (NYSE: KSS). Nordstrom will report Thursday after the close. Kohl's reports before market open on February 25 and JCPenney will post earnings before the open the next day.


Altschwager offered Neutral ratings for JCPenney and Nordstrom and Overweight for Kohl's. He maintained price targets of $9, $52 and $54 for the retailers, respectively.

Altschwager provided Q4 EPS estimates for Nordstrom and Kohl's, neither of which imparted much confidence: He projected Nordstrom to come in short of expectations at $1.21 under consensus of $1.22 and Kohl's to meet the Street's $1.55 expectation.

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Retail Following A Mild Holiday Shopping Season

Retail suffered this holiday season, as the warmest December in 55 years killed cold-weather apparel sales.

Investors will likely look at 2016 guidance after the tough quarter. Altschwager expects "cautious" order patterns from stores struggling with excess holiday inventory. Nordstrom declined to issue a holiday sales report, and the "low visibility" from the company put Altschwager in a pessimistic mood. He cited the company as the biggest risk, given its "upper-income exposure" and the aforementioned visibility. He sees a risk of below-consensus results.

JCPenney will fare better, Altschwager wrote, and its fourth-quarter report shouldn't have too many surprises for investors, except a possible guidance increase due to cost-cutting measures.

JCPenney was up 4 percent early Wednesday afternoon. Nordstrom was up 2 percent and Kohl's 3 percent, potentially signaling investor confidence in the retail sector despite poor foreshadowing from Altschwager.

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Latest Ratings for JCP

Sep 2016GuggenheimInitiates Coverage onNeutral
Aug 2016Morgan StanleyMaintainsUnderweight
May 2016Morgan StanleyMaintainsUnderweight

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