Brean Capital: Consumers Have Become Experts At The Game Of 'Retail Chicken'

Heading in to the holiday shopping season, Liz Pierce of Brean Capital updated investors what to expect with Thanksgiving being less than two weeks away.

"We believe cooler and more seasonal weather as well as lower gas prices have had a positive impact on traffic and conversion as we have seen more shoppers carrying bags over the past two weeks versus what we had seen in October," Piece wrote in a note to clients on Monday. The analyst adds that the best sellers seen so far include sweaters and outerwear.

All of the retailers under Pierce's coverage, with the exception of The Buckle, Inc. BKE have held some form of promotion event over the past few weeks, including buy-one-get-one free and offering an additional rebate off clearance and regular priced products.

Shoppers are now likely to "take a breather" this week in anticipation of additional promotions already announced for next week. The analyst notes that it is possible that the early promotional hype resulted in a "promotional fatigue" and hopefully retailers have saved their best promotions for Black Friday weekend, which starts on Thursday.

Shoppers have now become accustomed to waiting for compelling sales and have become what Pierce describes as being "experts at the game of retail chicken" which could result in further unplanned promotional activities.

Pierce notes there are two ways to invest in the retail theme ahead of the holidays. The first involves investing in "Best of Breed" names including Urban Outfitters, Inc. URBN, Chico's FAS, Inc. CHS and Zumiez Inc. ZUMZ.

Pierce also recommends investing in turnaround names with a revised real estate strategy that is more suitable to the needs of its "targeted, under-served and disenfranchised" client base. The two companies fitting the profile according to the analyst includes Christopher & Banks Corporation CBK and Destination XL Group Inc DXLG.