Starting Urban Outfitters (URBN +0.6%) at Outperform with $46 price target, analyst Morry Brown says it's is well-positioned to take on the two big challenges facing specialty retailers: The migration of sales to online and the continued growth of fast fashion retailers. "These two challenges play to URBN’s strengths, as its 25% online penetration is tops within our coverage and the company's fashion execution and nimble supply chain have been two of its key competitive advantages since inception."
2014 is setting up well for off-price retailers, he says, initiating Ross Stores (ROST +0.4%) with Outperform and $83 PT. Catalysts? The easiest SSS comps since 2008, a favorable buying environment following weak holiday sales, ongoing market share gains, and the lack of secular headwinds (online buying) faced by specialty retail peers.
Not everything's a Buy. Started at Neutral are Zumiez (ZUMZ) where Brown thinks it challenging to move to full-priced goods, Express (EXPR -0.6%) on worry about the recent trend in margin declines, and Buckle (BKE +0.4%) on "SSS headwinds from a promotional retail sector ... We await some relief in the promotional intensity across retail to turn more constructive."
Also a Neutral is TJX Companies (TJX +0.1%). As with Ross, Brown notes the year is setting up well for off-price, but Street consensus and the stock's valuation appears to have already factored in this upside.