Analysts Remain Bullish on Clothing Retailers
Abercrombie & Fitch Co. (ANF) and American Eagle (AEO) were both upgraded by analysts ahead of the critical holiday season, but many experts caution that the statistics may be misleading as shoppers continue to pinch pennies this holiday season.
Abercrombie & Fitch was upgraded from a Market Perform to an Outperform by FBR Capital. The firm also raised its price target for the high-end clothing retailer to $46 from $39 per share, saying that the company’s brands showed a material improvement in both traffic and conversions over this Black Friday weekend versus the same period last year.
American Eagle was also upgraded by Lazard Capital Markets from a Hold to a Buy. The firm maintained its $22 per share price target, but noted that accelerated sales trends in the first three weeks of November have continued to improve in the last week of the month and turned positive over the last few days, according to analyst Todd Slater.
Despite the positive news, many investors are taking the comments with a grain of salt. The National Retail Federation’s survey of shoppers found that consumers visited more stores and web sites than last year, but the average amount spent was about $343 compared to $373 a year ago. For the weekend, the total spending figure came in at about $41.2 billion.
High unemployment and a focus on value led many shoppers to seek out bargains at key retailers, but consumers ended up purchasing less high-end merchandise during their visit. However, the report confirmed that the most popular buys for the famous spending weekend were clothing and books, which were at levels similar to last year.
Meanwhile, indications of consumer confidence in other spending areas remains mixed as well. November new vehicle sales are expected to be down 4.5% from a year ago and 15% from October. However, new single-family home sales are expected to increase 5.1% from a year ago to 430,000 for the month of October.
In the end, clothing retailers may be one of the bright spots during a holiday season that could turn out more mild than many investors hoped. Retailer surveys are showing a decline in dollars spent, but spending on clothing continued to account for the bulk of buying this holiday season.
The Takeaway…
- Clothing retailers Abercrombie & Fitch and American Eagle were both upgraded by analysts that cited improved metrics this holiday season.
- The National Retail Federation’s survey showed that more people went shopping, but overall dollars spent declined.
- Other economic indicators show that consumer confidence in mixed, with auto sales declining and new home sales increasing.
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