Rob Black's Retail Stock Report

Two smokers can't bring a class action lawsuit against Philip Morris (MO) over the way the tobacco giant markets "light" cigarettes, the Ohio Supreme Court ruled yesterday. The smokers argued Philip Morris knew light cigarettes were as dangerous as regular cigarettes. The tobacco company contended a more specific warning from the state on a company's marketing practices was required before allowing lawsuits to apply beyond individuals to an entire class.

Citigroup downgrades General Mills (GIS) to Hold. The downgrade is based on option and debt expenses. General raised its fourth-quarter outlook and touted a strong fiscal 2006 performance.

The Wall Street Journal reports NutriSystem (NTRI) is trading at more than 31 times this year's estimated per-share earnings. That is well above the P/E of 19 for slower-growing Weight Watchers International and almost double the valuation of the average stock in the S&P. Even a modest disappointment could hit shares -- witness the 17% one-day drop in February when the company said it expected weaker-than-projected 4th quarter earnings. At the same time, a corps of short-sellers is betting on a fall for the company's shares, and insiders have lightened their stakes over the past year. The upshot for investors is that the company's impressive growth could continue for some time, but it is all likely reflected in today's stock price. "It's a tough stock for some people because they feel like they've missed it and will look bad if they buy at the top," says Jason Schrotberger, an analyst and portfolio manager with Turner Investment Partners.

You might of heard that cruise lines like Royal Caribbean (RCL) and Carnival Cruise Lines (CCL) were having problems with booking. Most potential cruise line vacationers are concerned with hurricanes and higher gasoline prices but other factors why we are avoiding cruise lines are boredom with itineraries, negative press stories, and rising interest rates. Surprisingly pirates and terrorism are not cited as factors.

UBS upgraded Circuit City (CC) to Buy and $36 target.

Wachovia upgraded OSI Restaurant Partners (OSI) to Market Perform based on valuation.

Wachovia upgraded Ruths Chris Steak House (RUTH) to Outperform. The upgrade is based on valuation and catalysts that include a pending franchise acquisition and a favorable commodity environment.

Bernstein upgraded Staples (SPLS) to Outperform.

Aeropostale (ARO) increased its stock buyback plan by $100 million, making the total buyback authorization $250 million.

Pier 1 Imports (PIR) reported a wider loss as store occupancy costs rose and customer traffic remained weak. The retailer of imported home furnishings said its first-quarter net loss was $23.2 million compared with $12.5 million. Total sales fell 3.6% to $376.09 million from $390.31 million in the year-earlier period.