- 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."
- "Look for Q1 to provide same store sales inflection," he says, starting Francesca's (FRAN +4.4%) with an Outperform and $25 PT. "We expect first sequential comp improvement in 7 quarters."
- 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.