Rob Black's Retail Stocks Report

Anheuser-Busch (BUD), the world's largest brewer, is considering entering the liquor industry as consumers increasingly shun beer. Beer's U.S. market share has been shrinking since it peaked in 1995 as it faces increasing competition from spirits, wine and even non-alcoholic drinks like Red Bull.

This trend could have a significant impact on the beer business and if it were to continue, Anheuser-Busch would have to reevaluate their business model going forward in terms of expanding beyond beer. Anheuser-Busch has tried to win back drinkers who have shunned domestic beers by introducing new products such as fruit-flavored Peels malt beverage. The company agreed last month to buy Rolling Rock from InBev NV for $82 million to attract new drinkers for the lager-style beer. Consumers demand "more variety, value and sophistication'' in the products they choose. Anheuser-Busch last year formed a new division, Long Tall Libations, to develop and market spirits. Its first product, a liqueur called Jekyll & Hyde, is being tested in several markets.

Kroger (KR) continues to deliver sales and earnings upside. The disciplined value model has proven effective for Kroger and is starting to yield sustained operating results. Sales momentum continues to strengthen - as evidenced by accelerating core identical store sales. Now the earnings recovery is gaining traction as Kroger realizes the SG&A leverage the model intends. The foundation built on years of investment and communication remains solid enough to sustain incremental improvements and drive multiyear recovery.

Bank of America upgraded Kroger to a Neutral and raised their target to $22.50. The firm is saying Kroger is now clearly gaining market share in the food-at-home channel. The firm says the company's strong sales and efficiency initiatives, moreover, will likely lead to modest operating leverage through the remainder of 2006 and into 2007.

Ryan Beck upgrades Joseph A Bank (JOSB) to Outperform with a $35 target based on valuation.

Urban Outfitters (URBN) stock is down 50% as the owner of stores Urban Outfitters, Anthropologie and Free People has found that dressing Ultra Hip is a tough place to be. The poor performance was based on a "tectonic shift" in women's fashion. After a decade of wide skirts and short, fitted shirts — think triangles — the hot, yet controversial new look became pencil-thin pants and skirts and big tops. The move to an "inverted triangle" was embraced by some "early adopters" but shunned by others.

Lehman Brothers upgraded Revlon (REV) to equal weight. The firm is saying it believes current market expectations that are embedded in share prices are attainable despite near-term challenges.

Stifel upgrades PepsiCo (PEP) to Buy and sets a $68 target saying they expect slight multiple expansion and another year of double-digit earnings growth to translate into the 15% potential upside anticipated by their target.