Barclays on Retail: Updated Thoughts Entering 2H11

Barclays on Retail: Updated Thoughts Entering 2H11

Barclays analyst said, "As we look across our Broadlines/Dept. Stores and Footwear & Apparel coverage universes, given a transition of responsibilities within the sector, we are making several changes to our ratings and price targets: We are increasing our rating on Macy's Inc. (NYSE: M) to Overweight, and downgrading BJ's Wholesale Club (NYSE: BJ) to Equal Weight. We are assuming lead coverage of Warnaco (NYSE: WRC), Hanesbrands (NYSE: HBI), and Signet Jewelers (NYSE: SIG). Separately, we have dropped coverage of Sears Holdings (Nasdaq: SHLD), Under Armour (NYSE: UA), and Fossil (Nasdaq: FOSL)."

"Given a challenging period of retail sales trends and our expectations for continued and increased headwinds from higher sourcing costs in the 2H11, we remain more comfortable with companies positioned toward the higher end and those that are better positioned to pass through the higher costs and partially offset at least some if not all of the gross margin pressures expected. Within our Broadlines/Dept. Store coverage, we remain comfortable with our Overweight rating on Tiffany (NYSE: TIF), as the company has managed its exposure to increasing raw material and metals prices well and we believe has demonstrated pricing power. Within Footwear & Apparel, we remain positive on Coach (NYSE: COH), given its continued attractive global growth opportunities, its ongoing sales momentum, leadership and positioning in the strongly performing handbag and accessory category, as well as opportunity for increased AUR. Accordingly, we are raising our price target on Coach to $70 from $68."

"We are also upgrading the shares of Macy's to Overweight given its exposure to the high end, via Bloomingdale's and the success and momentum of the My Macy's initiative. We are also raising our price target to $35 from $33."

"Our downgrade of BJ's Wholesale Club to Equal Weight is not a reflection of our opinion on the likelihood of a potential deal, rather it is solely based on our belief that at today's prices, other names under coverage provide a greater opportunity for incremental upside to the current price."

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