Wedbush Highlights Nov. Worse-Than-Expected Sales In Apparel Retail Group

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  • Shares of Buckle Inc BKE and Gap Inc GPS are down 42 percent and 38 percent, respectively, year-to-date, while L Brands Inc LB shares have gained 11 percent.
  • Wedbush’s Morry Brown maintained a Neutral rating on all three companies, while revising the price targets and estimates for Buckle and L Brands.
  • The apparel retail segment witnessed weak sales in November, Brown noted.

Analyst Morry Brown mentioned that the apparel retail segment witnessed weak November sales with SSS for most of the monthly reporting retailers falling short of the consensus expectations.

Buckle: Comp Trends Continue To Slow

Brown lowered the price target for Buckle from $31 to $30. He said that the company’s November comps were the worst monthly comps in five years, with margin outlook appearing increasingly tenuous.

The EPS estimates for 2015, 2016 and 2017 have been reduced from $3.07 to $3.04, from $3.07 to $3.00 and from $3.11 to $3.04, respectively.

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“We believe a lower multiple is warranted given a slowing sales trend and margin uncertainty,” Brown mentioned, while adding that the key risks facing the company include slow consumer spending, competitor promotions and a mix shift toward lower price point items in women’s bottoms.

Gap: Sales Downside Attributable To Banana Republic

The analyst maintained the price target for Gap at $27, citing “ongoing full price merchandise challenges at both Gap and Banana Republic as well as the clouded outlook at Old Navy.”

Although Gap’s November comps missed the consensus expectations, they were in-line with the Wedbush estimates. Most of the sales downside came from Banana Republic, which posted its fifth consecutive double-digit comp decline and its worst monthly comp performance since 2009.

Brown expects Gap to carry out heavy promotional activities across all its brands throughout the balance of the Holiday season.

L Brands: Continued To Deliver Impressive Results

Wedbush raised the price target for L Brands from $101 to $102 in view of the steady operating profile of the company’s domestic business and high margin growth from international expansions.

The company continued to deliver impressive results with no impact from poor trends across the segment. L Brands reported November same store sales of over 7 percent, ahead of the consensus expectations of over 3 percent, despite challenging year-ago comparisons.

“LB posted among the best sequential comp performances in 3Q versus 2Q, and trends seem to have only accelerated QTD, despite the difficult retail backdrop,” Brown mentioned.

The EPS estimates for 2015, 2016, and 2017 have been raised from $3.87 to $3.01, from $4.37 to $4.41 and from $4.95 to $4.99, respectively.

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Posted In: Analyst ColorPrice TargetReiterationAnalyst RatingsMorry BrownWedbush
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