Analysts Remain Lukewarm on Retail: Recent Upgrades and Downgrades

by: Alacra Pulse Check Blog

By Angus Robertson

US retail sales for October beat expectations but analysts remain lukewarm on the industry, if recent upgrade and downgrade activity is any guide.

Analyst rating downgrades have almost doubled the number of upgrades over the last month, according to a search of Alacra Pulse.

On the positive side, Williams Sonoma (NYSE:WSM) was upgraded to Buy by both ThinkEquity and SunTrust Robinson Humphrey.

The Buckle (NYSE:BKE) was upgraded to Buy by KeyBanc and to Neutral by Goldman Sachs. However, Roth Capital Partners, Susquehanna and Standpoint Research all downgraded the casual clothing retailer to Hold.

Goldman Sachs put Kohl’s (NYSE:KSS) on its Conviction Buy list, UBS upgraded Target (NYSE:TGT) to Buy from Hold and Morgan Stanley raised Walgreen (WAG) to Overweight from Equal Weight. But Nordstrom (NYSE:JWN) was cut to Hold from Buy by McAdams Wright Ragen.

BJ’s Wholesale Club (NYSE:BJ) was upgraded to Buy from Hold by Janney Montgomery Scott, while rival Costco Wholesale (NASDAQ:COST) was cut to Market Perform from Outperform by William Blair.

Atlantic Equities upgraded J.Crew (JCG) from UnderWeight to Overweight, but was cut to Neutral by Piper Jaffrey. Still, the company fared better than other specialty retailers, who saw a raft of downgrades: Abercrombie & Fitch (NYSE:ANF) to Sell at Brean Murray and to Hold at Standpoint Research and Aeropostale (NYSE:ARO) to Underweight at KeyBanc. Others changed to Neutral or Hold include Dick’s Sporting Goods (NYSE:DKS) by Needham & Co and Longbow Research, Blue Nile (NASDAQ:NILE) and Zumiez (NASDAQ:ZUMZ), both by MKM Partners.

In the discount sector, Family Dollar (NYSE:FDO) was upgraded to Overweight by Johnson Rice, while competitor Dollar Tree (NASDAQ:DLTR) was raised to Neutral by JP Morgan and lowered to Neutral or Equal Weight by Barclays Capital, Buckingham Research and MKM Partners. TJX (NYSE:TJX) was cut to Hold by Soleil Securities and Big Lots (NYSE:BIG) was lowered to Hold by ThinkEquity and to Neutral by Piper Jaffray.

Home Depot (NYSE:HD) was downgraded to Market Perform by CIBC Capital Markets, FBR Capital Markets and Raymond James, which also lowered Lowe’s (NYSE:LOW) to Market Perform.

Safeway (NYSE:SWY) was downgraded to Sell by UBS and to Hold by Standpoint.

Other downgrades to Neutral or Hold included Radio Shack (NYSE:RSH) by Barclays and Staples (NASDAQ:SPLS) by Bank of America Merrill Lynch.

At least games, pets and cars were in favor, with upgrades of Gamestop (NYSE:GME) to Outperform (Credit Suisse), PETsMART (NASDAQ:PETM) to Overweight (Barclays) and Advance Auto Parts (NYSE:AAP) to Market Perform (Citigroup and Oppenheimer).